Profit from Spread Trading

Did you know that you can rely on financial betting spread as a way to hedge your portfolio and enjoy some flexible terms? For instance, financial or market spread allows a well-informed trader to place solid wagers on financial instruments or global markets without ever actually spending a dime on the underlying stock or financial instrument.

Some people find it a challenge to profit from spread trading or financial spread betting as it is otherwise known. The stats are enough to put any sane person off – 90% are losers…some might say that its not worth the ulcer! It is true that it is not get-rich-quick scheme, and requires some thought and research to fully benefit from it; but compared to other ways of trading on the financial markets, it has much to recommend it.

If you want to profit from spread trading, you have to be prepared to put some effort into learning the best ways to bet, and also when not to bet. One of the important factors in making money from trading is that you must not lose too much, and if you bet on something that does not have good odds of winning just because you haven’t placed a bet all day, you may get the failure you deserve.

With that said, spread betting is easier to understand than other financial instruments, and less complex than futures, options, and even Contracts for Difference (CFDs), all of which can be compared to spread betting because of their use of leverage on your investment. The leverage means that you can start spread trading with £100, and still place bets that could give you large winnings.

Another advantage that allows you to profit from spread trading is that there is no capital gains tax on your winnings, no stamp duty, and no commissions to pay. Did I mention that it was easy to understand? These things are not due as you never actually buy any financial products but only bet on how they will perform, simply looking at the prices and betting whether they will go up or down.

A factor in winning in the financial markets is how well you know the product that you are trading, and on this count spread trading wins again. Rather than being stuck trading in stocks, or buying and selling commodities, spread betting embraces a wide range of financial instruments, and you are free to choose which you want to bet on.

This not only means that you can pick those that you know best, you can select amongst those for the markets that you think are most predictable at any time, making a profit from spread trading even more obtainable. In keeping with the overall simplicity of spread betting, you have no currency risk when trading in foreign shares, and betting always takes place in your own currency, placing say £1 per point of movement even if you are betting on the Dow Jones Industrial Average, or on the exchange rate between the US dollar and the Japanese yen (USD/JPY).

Lastly, to make a profit from spread trading you should make sure that you read all you can about the way that markets react, and put your knowledge into practise. Even though spread trading is only a few years old, trading has been going on for centuries, and much is known about how people will react to different market actions, and how prices tend to move. If you are prepared to put some effort into it, there are many ways to profit from spread trading.

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This is a form of speculation that can apply to any area of the markets, including what is known as forex (currencies), worldwide indices, and much more. What makes it even more attractive is that the trader determines their stake size, and most wagers are paid out per the difference between the selling and the original purchase price. For instance, a trader might initiate their stake at a set pound per point (or “tic) and the closing of the wager would simply pay the trader their established stake on any profit or loss.

This too is a reason that so many are turning to market spread betting – the wagers pay on predicted losses too. Because global markets are not performing well, a trader can endure a “short sell” and then turn and hedge their portfolio by making a market spread wager on this losing financial instrument.

Not only can this become an opportunity to improve a portfolio, but most investors enjoy their profits in an entirely tax free format. There are some risks and fees associated with these activities, however, and it behooves the investor to take some time to determine what they can actually profit on each wager.

For example, if a trader decides to ignore opportunities for purchasing spreads with “stop loss” features, they could see a bad choice turn into a catastrophic loss. Most traders will conventionally add the stop loss feature that allows them to determine when a losing wager automatically closes.

Additionally, not all spread betting companies offer the same spread size, which means that a higher profit margin may be available if you can locate a company offering a narrower spread on the deal. Because the number of spread betting opportunities to bet on spreads, has dramatically increased over the past decade, spreads are highly competitive. For example, ten years ago the standard spread hovered at ten points, whereas today it is common to find them at only two.