What is Spread Trading
Financial spread betting is essentially one way to ‘bet’ on the price movement of stocks, indices, currencies, commodities and other markets. Whilst this activity is commonly referred to as ‘Financial Spread Betting’, most participants consider this more of a ‘Trading’ activity than ‘Betting’. The ‘Betting’ connotation simply ensure that any gains are treated as tax exempt. So in a nutshell spread Trading is another name for spread betting which is another name for financial spread betting. The advantages of spread trading include the ability to trade quickly and cheaply online, access to an enormous range of markets, the opportunity to go long or short, and also but not least the tax free aspect of this trading product.
Spread trading allows speculators to gain from both rising or falling markets. Buying stocks via a traditional stockbroker involves paying the full market price, but with spread betting it is possible to create the same position with less capital outlay. A position on a FTSE company like British Airways would normally require an initial margin of just 5% of the market exposure.
Since spread trading involves betting on an outcome, physical ownership never takes place, as such, all profits are free from UK capital gains tax. In effect this is like borrowing to invest and ultimately the scope is to magnify potential returns, as a 2% rise in the price of British Airways stock would translate into a 40% return on the deposited capital. Unfortunately, this also cuts both ways and leverage can also work against you, which is why you need to apply sensible money management.
The simplicity of spread trading keeps making it increasingly popular. As opposed to buying or selling securities or lots, spread traders bet on price movement by betting an amount of money for every penny a stock price moves. This is referred to as stake size (i.e. £ per point) Betting £20 means for each penny a share moves, a spread trader will make or lose £20. If the share gains 10p, a spread trader will make £200 (20 x 10p). Here it is worth noting that £1 per point is about the same as buying 100 shares. Spread traders can be anything from £1 right up to over £1000 per point movement depending on their available trading capital.
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Spread betting is virtual trading in financial valued products. The meaning is that you can trade stocks, products and just about anything with a financial value such as gas, oil and gold without owning a share of it.
This means that you don’t need a lot of money for spread betting, you can make a lot of money in very little time and you can also lose money. The Spread Trading is much more interesting than stock trading opportunities online.
Spread betting unlike Forex of CFD doesn’t require much knowledge other than knowing the basic concept of spread trading
All you need is a spread trading company which you can find some recommended ones on OnlineSpreadTrading.com and you can move ahead and start trading in a matter of seconds.
The trading itself is done just like the over/under bet in sports. You bet whether the value of the virtual product you are betting on will go up or down.
For example: The spread of stock x by the spread betting company Y is between 340-350 and you bet for the value to go up. You bet by 5 GBP for 1 point and the price goes up by 10 points to 360. Congratulations you just made 5 x 10 gbp = 50 pounds from a single 5 GBP bet!
As simple as that. The same way you could have bet that the value will drop and you would be making your bet times the point amount of the dropping or rising.
The best thing about spread trading other than the fact that it’s tax free, is the fact you can limit your loss, for example place a bet for the value of oil to go up by 5 points and limit your loss to 5 points. This means that if the value of oil drops in 10 points you will only lose 5 points. This way you can place many bets and control your losses.
Spread trading is a great way to make easy money and the fact that it’s starting to blossom especially in the uk and Europe makes it so many companies with a respectful reputation who dealt with Forex till now are now switching to spread betting and becoming involved in this business.
It is estimated nowadays that more than 1 million British people are involved in Spread Trading.
Why don’t you join the financial revolution and start your spread trading journey today!
Good luck!