What is Spread Betting

Financial spread betting solves a lot of problems and this is especially true when it comes to access to World markets and the simplification of tax issues. There are some useful benefits:

  • I like that you can close a profitable trade and bank a profit but also that you can close a losing trade and limit your losses. Being able to part-close a trade also offers an interesting angle, i.e. closing part of your trade but keeping the rest of it open. This can be used to help manage your risk.
  • The ability to speculate across an extensive range global markets. Many spread betting providers offer countless markets which normally include stock market indices, stocks and shares, foreign exchange, commodities, bonds and interest rates.
  • Financial spread betting is tax free*, there is no capital gains tax, no income tax and no stamp duty to pay on spread bets.
  • You can go long (ie buy) or short (ie sell) of a market. This means that you’re able to make a profit with markets which are falling or rising.
  • Financial spread betting is commission-free and there are no brokers’ fees (the spread betting companies’ fees are built into the prices).
  • You can trade via mobile phone applications, online and over the phone.
  • The vast majority of new trades are processed automatically, or at least within a matter of seconds.
  • When the closing bell sounds, not all financial spread betting markets will close. Whilst the New York, Frankfurt and London stock exchanges may close many important markets remain open. Companies like Financial Spreads offer 24 hour trading, 5 days a week on key markets like the FTSE 100, EUR/USD, gold and crude oil. Note that with 24 hour trading, out-of-hours pricing may be applied, ie the spreads will sometimes be wider.
  • Spread betting certainly has it’s risks (see below) but there are a few steps you can take to limit your potential losses. One example is that you can add a Stop Loss to your trades. If a market moves against your position then the Stop Loss will close your spread bet and prevent you from losing any more money. Note that not all Stop Losses are guaranteed. Also see financial spread betting orders.
  • Some of the spread betting firms have started to provide free financial data for their clients. The data available can vary; however, it can often include Events Calendars, Market Heat Maps, Technical Analysis and Company Specific Data.
  • The fact that some markets can be traded 24 hours a day, 5 days a week, sets spread betting apart from more traditional stock trading.
  • Another advantage is that there are a wide variety of ways in which to make trades; online, over the phone, or even on some new mobile applications.
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