Facts On Financial Spread Betting
Spread betting works like an alternative option for the more traditional trading sectors for investors in the stock market. Not recognized under tax laws, profits earned under are tax-free, due to be classified as a form of gambling, meaning you get to keep all the profits you made. What makes this area special is that you bet on whether or not the market goes up or goes down; the actual movements. Bet on the right one and you get to keep profits. Traditional trading means losses when the market is down but if you bet that the market will be down, you can get profits from that with this investment product.
Some key terms
Margined trading in this derivative is fairly easy to understand. Here are some terms that you will come across when you consider this wager:
# Bet – with spread betting, you will never own actual shares or commodities. You simply make a bet with regards to whether the market will go up or down. Certain amounts of money are staked for every point in the market movement and the more it moves towards your prediction, the more profits you can enjoy.
# Spread – spread is the difference at which you can sell and buy and involves going long or going short. You go long when you buy at higher prices predicting that market prices will rise, while you go short if you sell at a low price since you’re predicting that the market will fall.
# Stock market indices – the most popular market in financial spread trading
# Commodities – energy resources (US crude and natural gas), metals (silver and copper), or softs (cattle and soybeans).
# Currencies – actual currencies that countries use. The most popular pairings in sp used by investors are GBP/EUR, GBP/USB, and USD/JPY.
Getting a financial spread betting company or brokerage firm
The spread betting company you hire will help determine how well you can make profits. Here are some factors for you to consider:
# What are the company’s margin requirements;
# How tight are their spreads;
# What markets do they cover;
# What kind of risk management tools are available;
# What sort of charting tools and news services are offered; and
# Do you like their trading platform.
Are there risks?
Any sort of field where betting and investing is involved, not only spread betting, will involve certain levels of risk. In the case of spread betting, there is a direct correlation between how much risk you are taking and what sort of payout you’re looking at. This means that while risks are high, you also stand to gain a lot of profit should you make the right risks. This is also why it’s important to find the right company to handle spread bets for you.