Hedging Your Bets With Financial Spread Betting
Jul 16, 2009 Business Loan
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Many traders in the stock market have lost money, while few have made money. And no matter how easy online e-books say dabbling in this market is, it actually isn’t. Financial spread betting is another matter entirely, it is a different way of trading in stocks and shares, and online traders are able to speculate on the prices of stocks and shares without any assistance from stockbrokers.
Speculation on the movement of stocks and shares when you don’t have to pay commissions to a broker has its benefits. It basically means that the trader makes more profits. The trader is required to place a wager on financial markets and if the prices of these will increase or fall.
The “spread” refers to the “Sell/bid or Buy/offer price. These prices are calculated based by adding more points to the live market price of the product (financial) and this is the estimated future price. This price is quoted by the spread betting company. An example of this is if the Daily FTSE trades at 4729, then the company will quote figures of say 4727 - 4731 and the trader places a bet on this price.
To open a new position in the market a very small deposit is required, generally about dollar, euro, pound10 - 40. Each bet is on each point or tick in which the market moves, either up or down. The stake is usually 1 on each point of movement and will represent either profit or loss.
Each financial market has their own maximum stake allowed, so you bet your 1 pound, dollar or euro per tick (point), choosing a bet that the market price will increase or alternatively, drop. If your wager is correct then you win or rather make a profit which is the amount of your wager or stake multiplied by the amount in which the market moves in your favor. If you wager is incorrect you lose your stake multiplied by the amount of points the market moves in the opposite direction.
It is very important that the trader understands that in as much as profits can be made, losses can also be incurred and it is not only a case of losing the wager amount, it is multiplied.
Because spread betting is considered to be a “bet” in the UK, and profits from this system of wagering do not have to be declared to the Tax Man. They are neither subject to Income or Capital gains tax.
It is highly recommended that trader who is new to spread betting open a demo account first before signing up for a live trading account and depositing funds. The demo system will mirror exactly what happens in the live trading account and will come with a beginners guide to the system.
Being exposed to the spread betting system with no risk involved is the best way to learn all about it. Only once the trader is confident that they have the concept firmly in their grasp should they consider opening a new position in a live account. Make sure the company you choose provides a demo account and beginners guide!
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Tags: betting, Business Loan, Commodities, Currencies, financial spread betting, investments, markets, oil, shares, speculating, Speculation, spread betting ftse, spread betting oil, spread betting shares, stocks
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