How to Bet the Spread
How to Bet the Spread
Bid-Offer spreads are a fact of life for all market participants and this also applies to spread traders. So how do bid-to-offer spreads work in practice?
Spread betting providers don’t charge a fixed commission fee per deal as when trading with a traditional broker, however you will suffer the bid-offer spread as set by your spread trading company. Let’s suppose you are thinking of opening a long bet on the FTSE 100. The spread betting provider quotes you a spread of 5601 – 5606 with the spread between the two values representing the broker’s take. As a buyer you could open a trade at 5606 (the provider’s offer price). A seller, believing that the value of the FTSE would fall, would enter a position by selling at 5601; the provider’s bid price located on the left of our quote.
Thus you might enter a long position for £10 per point at 5606 believe the price to move up. If the FTSE starts rising and the quote shifts slightly to 5603-5608 you could in theory sell the position at 5603. However, selling at 5603 at this stage would incur you a loss due to the spread.
You bought at 5606 at £10 per point
You sold at 5603 at £10 per point
3 points x £10 = £30 loss
So even if the FTSE moved slightly in your favour you still incurred a loss due to the provider’s spread.
If you didn’t close the position and the FTSE kept rising in price and the new quote is, say 5642-5643 – you could sell at 5642 and make a profit.
You bought at 5606 at £10 per point
You sold at 5642 at £10 per point
36 points x £10 = £360 profit
Note that in general, the more liquid the market being traded, the narrower the spread tend to be – and with the better your chances of turning your position into a profitable trade.
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Click here for a good resource to learn more about spread betting Since this market is not something you learn easily and since real money is involved, the information you need to gain before you make the investments is important in order to maximize the money you invest.
Like other online bets to place, the know how to bet the spread is the first step, but do you already know what is the spread betting market? This spread you are betting on is the actual spread between the selling price on the market and the buying price you can find. The spread betting company, which can also help you to learn how to bet the spread, is quoting two prices for the investors, the buying price and the selling price. The instrument bid is the online publishes price that you can sell at, while the offer is the price to buy at. These two terms: “bid” and “offer” are the heart of the knowledge to bet the spread, and the difference between these two is the spread itself.
When you choose your Spread to bet one, this is the main thing to take care about: how to bet the spread on the specific program you are using. Since there are many providers online and they are all competing on your account and on the option you will bet on spreads with their program, this competition can worth you money. When you come to bet the spreads, you can always check for the opportunities which are open for you and for your betting account, and the risks you will have to take on each and every bet. On the first spread bet you have to take, these numbers may be too small and may be not relevant, but and the time passed and you get into the spread betting, online, you will see that each extra percentage you can save, will worth you a lot of money for the long term.
Since the Spread betting is so popular online, there are software’s and guides to teach you how to bet the spread. From each you can learn something new and take advantage from other trader’s experience. Make sure to choose the right guide and the best software in order to learn how to bet the spread, since some of them may be scam and others may serve the interests of the spread betting program itself.