Types of Spread Bets explained by ForexSQ experts, Learn about the different types of Spread Betting in financial markets and how you can make money online by betting on spreads.
Types of Spread Bets
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There are 2 major types of spread bet to make money online, Financial spread betting and Sport spread betting, In this article we focus more on the different types of spreads betting in financial markets.
In financial 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 Financial 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.”
Forex Spread Betting
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.
Different Types of Spread Betting in FX market
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.
UK 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.
Financial 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.
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