Benefits of Spread Betting explained by ForexSQ experts, The most important benefit of Spread Betting online in financial market is you can make money by bet on spreads on both up or down price of a currency pare, Read more below about advantages of Spread Betting online.
Benefits of Spread Betting
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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.”
Other Benefits of Spread Betting
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 is another Benefit of Spread Betting
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 a 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 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.