Financial Spread Betting Explained

Online Spread Betting

Financial Spread Betting Explained

Financial spread betting explained in an easy to understand way. Learn how to consistently make money from trading and investing in the financial markets through financial spread trading.

Online spread betting
accounts can offer individuals access to 24hour  trading, to go long or short in a wide variety of markets, with no brokers fees or dealing costs and currently here in the UK, any profits are tax free. The 'betting' status means that financial spread bets are categgorised as gambling and as such, there is no income tax or capital gains tax to be paid on any profits gained from this form of trading. These key advantages can mount up to a substantial saving over an equivalent trade through traditional trading. More about the Advantages of spread betting explained

 It is important to bear in mind that this means that losses can not be offset against other gains for tax purposes and Tax Law can change and may differ in other jurisdictions outside the UK.

Basics of online spread betting explained

It is quite straight forward really, in spread trading, you do not actually purchase the underlying investments, you are simply  taking a position on whether that market will rise or fall.  If you predict correctly that that a market will rise, you win your stake multiplied by the number of points that it moves in your favor. If the market moves against you, you lose your stake multiplied by the number of points it moves against you.

A spread bet of £1 per point is the equivalent of buying 100 shares through a stockbroker. If you placed a £10 buy trade on Bp you would not own any shares in Bp, but if the share price rises by say 50 points, you win £10 x 50 = £500 profit. In exactly the same way, if prices dropped by 50 points, you would lose £10 x 50 = £500 loss. 

Risk Warning

Spread betting and CFD trading carry a high level of risk to your capital and can result in losses that exceed your initial deposit. They may not be suitable for everyone, so please ensure that you fully understand the risks involved.

Learn more about how to
Financial Spread Bet at City Index

Spread betting explained - leverage, margin, gearing

Spread betting leverage, margin or gearing is one of the key features of financial spreadtrading that should be utilized to the traders benefit, but if the associated risks are not respected it can lead to some pretty disastrous results. Leverage, margin and gearing - these are all terms for the same process where you are only required to deposit a percentage of the total value of the trade.

Legal Status of financial spread betting explained

In the UK, financial spreadbetting is legal and fully regulated by the FSA. Spread betting in many EURO countries is a perfectly legitimate form of investment as it is in may other countries such as Canada. Financial spread betting in USA is not legal due to it being classed as online gambling there. Please check out the current regulations where you are to see if you can take advantage of the benefits available.

Summary of the key Advantages of Spread Betting Explained

  • Tax free trading  **Tax Law can change and may differ in other jurisdictions outside the UK
  • No commission or brokers fees
  • Go long or short
  • Hedge your portfolio against falling markets
  • Trade online or by telephone
  • Mobile dealing
  • 24 hr trading
  • Wide range of markets available from one account
  • Trade on margin
  • Small stakes
  • Automated stop losses and limit orders
  • Practice trading accounts
  • Trade in your preferred currency
  • Regulated by the FSA 

Learn more - Advantages of spread bets explained in more detail

Risks of Financial Spread Betting explained

All financial trading has risk involved with it, but spread trading does have has some additional risks associated with it. Risks of financial spread betting explained...

  1. Because you do not actually own the underlying assets.
  2. Leveraging is involved, which means that you can lose more than your original investment. Profits are magnified when you get it right, but the flip side of that is that it also means your losses can escalate rapidly when it goes against you. 
This makes it essential to manage risk properly when spread trading as you can not simply close your eyes and forget about a losing trade in the hope that prices will rise again eventually.  Traders Day Trading - strategy is to control the risk anytime we take a trade, and it is that risk control that makes the difference between what we do and what the punters so down at the book makers.

Risk control is without a doubt,  the key to successful trading. Read more about this in the Position size and Money Management trading strategies sections.

financial spread trading explainedLearn online spread betting and apply for an account at Capital Spreads
( Capital Spreads is a division of London Capital Group, authorised and regulated by the FCA )

How to get started and where to spread bet

What do you need to get started? Online spread betting has many advantages over telephone dealing, so basically all you will need is a computer, some trading funds to open an account with, and a little bit of knowledge of course.....thats where we come in and what the Traders Day Trading website is all about.

Learn more on how to start spread betting explained in more detail.
How to Start Online Spread Betting

Financial Services Complaints

If you have a complaint or feel that you have been unfairly treated by a financial services company, the first thing you should do is to contact the company you have a dispute with and officially report your complaint.

You should keep a complete record of events as they occur, including phone calls, dates, times and names of the people you spoke to.

If your dispute is not resolved quickly then you should consider writing a formal letter of complaint to the company detailing events as you see them.

If you have done these initial attempts to resolve any issues but feel that it has not been resolved to your satisfaction, you can complain to the Financial Ombudsman for an independent view, but this must be done within 6 months of the last response from the financial services company involved.

financial spread trading explained spread betting explained

Spread betting Advantages explained

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