Spread Betting

Spread Betting tips explained for beginners by ForexSQ experts, You will know what is spread betting in Forex trading and what are the best UK brokers and online companies for betting spreads.

The professional financial investors at ForexSQ.com have compiled the following information to help you understand the concept of “spread betting” in foreign currency exchange (forex) and other financial investment markets. We also endeavor to provide information to help you choose broker for spread betting in the United Kingdom and other European countries where it is legal, as well as advice about opening a spread betting demo account with the best spread betting companies firm of your choice. Let’s start by explaining “spread betting” and what is spread betting UK rules which is considered a derivative investment strategy because the underlying asset that is the subject of the investment is never actually owned by the investor.

Instead, investors (spread bettors) are only guessing or speculating on their belief that the price of the asset will rise or fall.  Current asset pricing is provided by brokers to potential investors in the spread betting investment arena from which to make their decisions/predictions regarding the future fluctuation in price of any particular asset.

Spread betting is available in a wide array of financial investment markets, including stocks, commodities, foreign currency exchanges, market indices, like NASDAQ and the Dow Jones, CFDs and many more.

What is Spread?

In spread betting, as in trading shares of stock, a broker quotes two prices for the asset in question and they are (1) the price at which you can buy a share of that asset and (2) the price at which you can sell a share of that asset.  The difference between buy and sell prices of the asset is referred to as the “spread.”  

What is Spread Betting?

When an investor engages in spread betting, he or she is predicting the future fluctuation in price (rising or falling) of whatever asset is the subject of the investment. The degree of accuracy with which the investor is right or wrong determines the size of the profit or loss realized in spread betting.

In fixed-odds betting, there is a simple “win or lose” outcome with a predetermined amount of money for the payout or loss.

In spread betting, the investor is speculating on the future direction (rising or falling) of the price of whatever financial instrument is the subject of the spread betting investment and the payout varies, depending on the range (or degree) of fluctuation in the asset’s price.

If the asset’s price moves in the direction you predicted, you will profit from your investment and the amount of your profit increases with the growth of the asset’s price fluctuation from the original price.  In other words, if the price of the asset moves in the direction you predicted, your profit from the investment grows more the further the price goes more in the direction you accurately predicted.

If the market moves against your speculation on the asset’s price, your loss will also increase the more the asset’s price fluctuates in that direction that is adverse to your position.  

In spread betting, predicting an asset’s price will increase is referred to as “going long” and predicting it’s price will decrease is called “going short” or “shorting.”

Spread Betting in Forex

As in other investment arenas, a broker quotes two prices to potential forex investors and the difference between those two prices (the buying price and the selling price) is considered the “spread.”

The foreign currency exchange market (forex) involves predicting the fluctuation in price of a certain pair of foreign currencies.  Traders speculate as to whether the price of the forex pair of currencies will rise or fall.  

In forex spread betting, the investor bets on whether the price of the forex pair of currencies will be lower than the bid price or higher than the asking price.  The narrower the spread between prices of the two currencies, the more attractive that pair of currencies becomes to potential investors.

Forex trading is also considered a derivative investment since the investor never actually obtains an ownership interest in the asset, but merely speculates on future price fluctuations of the pair of currencies.

What is a Spread Trade?

Spread trading is also known as relative value trading and involves the simultaneous purchasing of one asset and the selling of a related asset (called “legs”) as a unit.  

In the forex financial investment arena, a spread trade is a type of investment that tracks the fluctuation of prices between whatever two currencies (assets) you are going “long” and “short” on at the same time (or simultaneously).

For example, in other market platforms, an investor could place a spread trade involving the price of soybeans in August as compared to the price of soybeans in December.  Or an investor could speculate as to the difference in prices between January Chicago wheat and January Kansas City wheat, etc.

Spread trades are basically speculations as to the difference between the prices of two equities or assets (i.e., the difference between the price of the strongest stock as compared to the price of the weakest stock in an investment arena).  There are numerous possibilities of asset combinations for spread betting trading.      

Spread trading is one of the most confusing arenas for financial investments, even to seasoned traders.  Should you have any questions about this type of investment, please contact the professional team of investors at ForexSQ.com who can help with explaining, formulating and placing spread betting trades.

Managing Risk

There are definitely risks involved in highly leveraged spread betting, but there are things you can do to protect your investment.

One such tool is called the “Standard Stop Loss Order,” which reduces risk by automatically closing a trade when the asset’s price on the market reaches a certain, predetermined price level.  With standard stop loss orders, the trade will close at the best available price once the set “stop value” price has been reached.  It is also possible that your trade could close at a level that is worse than your predetermined “stop trigger,” especially in highly volatile trading markets.

Guaranteed Stop Loss Orders allow you to close trading at precise (predetermined) value you set, no matter how the markets are performing.  With this type of risk management tool, you will probably have to pay an additional fee to your broker and the amounts of those fees vary between brokerage firms.

Spread Betting Tips

Spread betting investments are available in the United Kingdom where brokerages are overseen and regulated by the Financial Conduct Authority (FCA).  One of the most important things to remember when deciding on a broker for spread betting is that you should only conduct trades in countries with regulatory bodies overseeing financial investment markets and the brokers who conduct trades within them.  Some countries have no such authority and you would be wise to avoid investing in financial markets of those countries and staying with the ones that are highly regulated, like those in the UK.

Forex Spread Betting Companies

There are millions of spread bet brokers in the world from which to choose to open a financial investment trading account.  The professional investment experts at ForexSQ.com want to help make that decision a little easier for you by providing our Top Ten Forex Brokers list.

You can also visit spread betting brokers reviews list to view the results of our research into the best spread betting brokers in the UK with which to open a trading account.

Online Spread Betting Demo Account

When considering spread betting brokers, be sure to choose one that offers a demo trading account with which potential investors can dabble in various investment markets using virtual transactions.  Once you are comfortable with your own ability to make sound spread trading judgments, you can open a real trading account and start spread betting in a variety of financial markets. 

With the continued sophisticated development of online electronic financial trading markets, spread betting has never been easier and is quickly becoming a popular alternative to investing in the financial marketplace.

As always, if you have any questions or concerns about any aspect of financial markets and trading within them, please feel free to contact the professional team of investors at ForexSQ.com.

Referral

The professional traders and investors at www.ForexSQ.com hope that you have gleaned valuable information regarding spread betting from this website and encourage you to share it with friends and colleagues using whatever social media accounts you maintain.

Financial Spread Betting Tips By ForexSQ Infographic team

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The ForexSQ team has also compiled articles about how to make money online by Commodities trading, Indices trading and Equity trading.



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