Spread Betting: Your Questions Answered
What exactly is spread betting? If you’re interested in trading then the specifics of spread betting are important. Find out whether this is a good option for you with these key details about the spread betting process.
What is Spread Betting?
With spread spread betting with CMC Markets you don’t buy or sell assets or shares but instead you place bets on whether the asset will go up or down in price. Spread betting is a way of trading on price movements and bets concerning all kinds of financial products like shares, commodities, and currency pairs.
What is the Process of Spread Betting?
When you trade using the spread betting process you decide to buy or sell your “stake”, which is the amount you are putting on every point movement. So when a product moves in your favour by one point, you receive your stake in the multiples you bought in. Of course, you can also lose in multiples if the price moves in the opposite direction than the one you bet.
What is the Spread?
The spread refers to the difference between the price you buy at and the price you sell. If a product has a tight spread the position doesn’t need to move very much before you make a profit or you make a loss. The size of the spread affects the cost of the spread betting process.
What are Margin and Leverage in Spread Betting?
When you spread bet you are trading on a leveraged product – this means that you put in a percentage of the bet’s entire value in order to trade. This process is referred to as “trading on margin”. The process of trading on margin is a way of increasing your returns, but losses too will be increased if the price alterations are not in your favour.
What Affects Price Movements?
With spread betting you need to keep an eye on what’s going on in the real world as events and political decisions have a big influence on the movement of prices. You can look to see what happened in the past in certain cases but of course this is not an indication of what will happen in the future. If you are new to spread betting you can learn more about the techniques and strategies to develop through online courses and online educational material. It is important to learn how to use the platform you choose for spread betting and to educate yourself on how prices are affected by market conditions.
Is Spread Betting the Same as Buying Shares?
No, the procedure is different and many people prefer to spread bet over buying shares as there are a number of advantages to the procedure. The first being that you only need to have a small percentage of the overall trade value in order to open a position. Any profits are tax free and there is no stamp duty. You can trade 24 hours a day on global markets, wherever there are financial products gaining and losing value.
Photograph by Stefan