What is it with Spread Betting?
Spread betting has been one of the most attractive business ventures among the people of UK due to the lucrative profits with what most people assume to be a simple operation of a spread betting software. It involves speculating the rise or fall of a market value of a product, or a currency and bet on it, without necessarily buying or selling the shares or a commodity in question. If a player makes a right bet, their value of money used in the bet rises. Since there is no exchange of ownership of any goods, there is no form of tax that is involved. This fact has made this sort of trade attract very many people. The flexibility of the business makes it even more attractive to those who do not want anything too serious, such as avoiding some tax, or with a bureaucratic process involved in the change of ownership of shares. The two points make the practice similar to CFD trading. However, when trading with CMC markets, spread betting attracts no commission, for any order executed. The charges free spread betting practice, especially when using the CMC platform attracts many traders. However, the practice is restricted to UK residents only.
Process of Spread BettingThe steps followed are straightforward and direct; a new member can use virtual funds to try out the new income earning bet. The first thing is to choose the commodity one can opt to gamble. This could be a product that one has just learnt about a possible fluctuation of market prices shortly. Once a trader has identified a potential profit is making commodity- be it a commodity, shares, treasuries or indices- one can open a sell for a falling price or a buy for a rising price. While any investor is free to place an order with any of the hundreds of available choices in the disciplines above, it is advisable that one concentrates on a select few items. This will ensure a closer observation and follow-up with the trend of the particular commodity. Placing an order is just a simple as clicking the sell or buy button at any point.
Figure 1: assessing the spread of a commodity
Risks Associated with Spread Betting
Normally, the possibility of losing all the ventured money is just as high as that of gaining. However, the higher the risk, the higher the returns. It is, therefore, advisable to place orders bearing risks that one can stand to lose as much as one would admire to make some profit. Using a demo account to sharpen one’s skill is important as it helps one to reduce the risks involved. The main secret of finding the best company to place a bet with is not easy. It demands to look at past values, projecting the expected values and the time it would take for the value of shares to either shoot down, to the regular prices or rise to the standard value if the prices were low.
In spite of the volatility of market prices, most experienced spread bettors can accurately put their money on a given bet, and as sure as the sun, take their profit after the betting period ends. However, this is not as cool as it looks, having a relative analysis of all similar companies so as to predict a rise or fall is not easy. It is advisable to ensure that when the risk involved appears high, a large stop loss, betting with a low fraction of the capital is recommended. For low-risk bets, increasing the size of the bet is commendable since there is a chance of making a huge fortune. Some investors are willing to spend more than ten hours reading and watching business news, just to ensure that no market change goes unnoticed.
Spread Betting MarginsThese are the tools that ensure only those with cash play the game. Margins ensure that bettors use their resources well and therefore spread bet responsibly since their capital is at stake. The deposit margin will make sure that one loss something when the market goes against their bet. This is money that is deducted from their capital and is reimbursed, together with added maintenance margin, once the market goes aligned with their predictions. A good broker such as the CMC will ensure that the software executes every pressed button immediately and has no financial toll. Finding such good agents is not easy.