subject: Simple Introduction To Spread Betting [print this page] Financial spread trading, also called spread betting offers investors a tax-free instrument to speculate on financial market movements whether they are growing or falling. It also permits for the trading of commodities, indices, currencies, precious metals, bonds, in addition to equities all from a single account. This can be a derivative product which in simple terms means that the rates you are trading on will be derived from the underlying product. The actual spread would be the difference between the price you buy along with the price you can sell at.
Once the trader is ready to place their bet or position they may go long or short based upon on what they feel industry will do next. If the market movements are in their favor then they are going to profit; should the market movements do not go in their favor they will lose.
Spread betting utilizes a margin (Initial Margin Requirement); the trader will only need to deposit a specific percentage of the exact position, which is set by the broker. By using this leverage the traders opening deposit will allow for more exposure to a larger portion of the underlying market. Because of this a trader can actually incur losses which will be over their initial deposit.
To safeguard the capital within your account it is very important to create your stop loss or stop win order. A stop loss will close the position automatically as per the order when at loss. A stop win does virtually the same as the stop loss except when in favor.
In financial spread trading the bet can be created as a 'Daily Bet, 'Rolling Bet' or 'Contract Month'. When starting a daily bet it is going to close at the end of the trading day which it was opened. A rolling bet will not close at the conclusion of the trading day, but rolls into the next trading day. The rolling bet will incur additional financial fees, so you should check with your broker for costs. The actual contract month bet is one that is opened and will close at the date specified and may be open up to three months.
A final thought, if you're new to financial spread trading you must ensure that you understand the many factors and terminology required. Be sure that you fully grasp leverage, margin trading, stop loss orders, in addition to be aware of market you are opening your positions in. Know when your position is actually expiring and watch for most recent announcements which could cause capital loss, and finally recognize the fees which you may incur.
