In the second part of our guide, we delve into exactly what spread betting is and how it works. Learn the history of spread betting, which markets you can spread bet, regulation and protections of spread betting, and basic risk management tools you can use in spread betting.
How Does Spread Betting Work?
This section walks you through the nuts and bolts of exactly how one goes about spread betting, from opening an account – to understanding trading with leverage – to picking a market, selecting a betting stake size, and placing a bet.
“Spread betting, to put it in the simplest terms, is speculating – by placing a bet – on whether a financial asset – such as a stock or commodity – will increase or decrease, rise or fall, in value.”
A Short History of Spread Betting
Here, we explain the origins of spread betting and why it has become so popular.
“Where the 1980s were lacking for spread bettors, the 1990s and beyond the turn of the century seem almost like they were tailor-made for the successful boom in spread betting.”
Which Markets Can You Spread Bet?
Learn about the extremely wide range of financial markets, both domestic and foreign, that is open to spread bettors, including stocks and stock indices, commodities, interest rates, and foreign currency exchange (forex).
“One of the primary advantages that spread betting offers individual retail investors is the ability to make money trading a wide range of financial markets…you can spread bet markets such as foreign stock exchanges, commodities, and bonds, all from the convenience of a single trading account.”
Spread Bet Types
This chapter takes you through the different types of spread bets and different types of orders that you can use in spread betting.
“Besides placing spread bets on different time frames, you can also use a variety of order types to either enter or exit a spread bet on your spread betting broker’s trading platform.”
Basic Spread Betting Risk Management Tools
One of the keys to mastering spread betting is carefully managing your risk. Learn the risks inherent in financial spread betting, such as trading on margin and unexpected economic events, and how to use tools such as hedging and stop-loss orders to manage those risks.
“Before deciding to trade, make sure that you understand the risks, the market you plan to trade, and how to use the various risk management tools offered by your spread betting provider.”
Sports and Financial Spread Betting
Sports spread betting is the other half of the spread betting markets that is offered along with financial spread betting. This chapter explains the difference between sports spread betting and traditional fixed-odds sports betting, and will help you decide whether sports or financial spread betting is the best market for you.
“…a traditional, fixed odds horse racing bet is a bet on which horse will win the race, while a spread bet can be on something like the number of lengths the winning horse bests the second-place horse by.”
Spread Betting Regulation and Protections
As a legitimate financial enterprise, spread betting is supervised and regulated by the government. Here you’ll find the important information on what authority regulates spread betting and what financial protections spread bettors are offered.
“In order for a spread betting firm to be licensed and authorised by the Financial Conduct Authority to operate in the UK, it must abide by several key regulations that govern trading firms in the financial services industry.”
How Spread Bets are Priced
Spread betting is all about the spread, so it’s important to understand how spreads are set, how spread bets are priced, and how the spread works.
“The spreads quoted for any specific spread bet constantly change in accord with the bid and offer spread for the underlying financial security. The spread will be narrower when betting on securities that are heavily traded, where the trading is very liquid, such as the most popularly traded stocks or most widely traded currency pairs in the forex market.”
Spread Bet Examples
Having given you a lot of information about spread betting, we offer some specific spread betting examples to help you more clearly understand how buying and selling in the spread betting markets works.
“In order for your spread bet to be profitable, the price must move enough to overcome the spread. You buy at the higher spread price, the ask price, but sell at the lower spread price, the bid price.”