An Introduction to Spread Betting

When people talk about spread betting there is an assumption that they are talking about the number of throw-ins in a football match. Sports based spread betting has been outgrown by trading on the stock market however, and this type of spread betting is growing in popularity at an unprecedented rate.

The idea behind spread betting on the financial markets is very simple. You pick a direction in which you believe the market will move and then you trade a certain amount of money on the market moving in that direction. If you are right you regain your stake multiplied by how many points the market moves, if you are wrong you stand to lose your stake multiplied by how many points the market moves.

For this reason spread betting can be quite dangerous. It’s very easy to lose large sums of money, particularly if you trade without knowing exactly what you’re doing, and what measures you can use to limit your losses.

So if you’re interested in spread betting the first thing you need to do is find a company like CMC Markets who operate a trading platform. The platform enables you to see what is happening on the stock market and what is happening with your trades. Once you have opened an account you will be able to access various training exercises and a wealth of information on how to trade. Start with a demo account where you can trade very small or even imaginary sums of money. You shouldn’t move to trading properly until you’re fully familiar with the mechanics of the platform. Have a look at the CMC Markets website to get a feel for the sort of introductory packages typically offered by spread betting companies.  
Spread betting can be a lot more complex than simply guessing how the markets are going to move. Trading platforms include thousands of different markets, you can trade on overall share indexes (like the FTSE), on individual shares, on groups of shares, on commodities (such as oil or gold) or on the strength of one currency compared to the other (for example, the dollar against the pound). Just about anything that is traded on the real stock market can be traded through spread betting.

The best advice is to pick a market, learn about that market and what dictates its movements and then trade accordingly. If you want to make money from spread betting you need to know as much about your market as you possibly can or you will probably end up losing more money than you make.

One final thing about spread betting is that it’s exempt from Capital Gains Tax, making it potentially more attractive and lucrative than trading directly on the stock market.