The Basics of Spread Betting

Spread betting has been gaining popularity in recent years so if you’ve been hearing the term but are unsure of what it means exactly, read on to increase your knowledge and consider giving it a go. Whether you’re a financial novice or expert in the field, it’s always good to stay up to date with what’s big in the current market.

 

What Is It?

Spread betting is a form of wagering that involves placing a bet not on the specific outcome of an event, as is the case with traditional betting, but on the range, or spread, of options in the predicted outcomes. To elaborate, you wouldn’t bet on the winner of a horse race, for example, but on how much the outcome of the race will vary from what the bookmakers expect will happen. Spread betting is more about wagering on the range of possibilities of an outcome rather than betting on one specific outcome.

 

How Does It Work?

Those who participate in spread betting may seem like part of an exclusive community but really, anyone can do it. In order to try spread betting, register with a spread betting firm like Interactive Investor or one of the many others you’ll find online and start practising placing wagers. Most major spread betting companies will allow you to create a demo account and practise placing bets so you can get the feel of it before putting any of your money on the line. Remember- you are wagering on the range of outcomes rather than one possibility (win or lose) so whether or not you come away with a “winning” bet depends on the accuracy of the wager. Practising your spread betting tactics will also allow you to see first-hand how much profit or loss can result from each bet.

 

Terminology

Terminology in any field of finance can make you stop in your tracks, but once you get the jargon down, you’ll see that spread betting really is quite straightforward. The spread is the range of outcomes for any event, and you can either ‘go long’ or ‘go short’ with your bet. If you are betting on a particular share in the market, then you’ll win money if you ‘go long’ and the price of the share rises or if you ‘go short’ and the price of the share falls. You’ll lose money if the reverse situation happens ( i.e. if you ‘go long’ with your bet, wagering that the share will rise in price, yet in actuality the price of the share falls). Spread betters are best known for going short, or betting against, a spread. However, money can be made either way as long as you play your cards right.

 

The Benefits

If done right, spread betting can be very lucrative. It’s also tax-free and you can place your bets online, be it on your laptop at home, on your lunch break at work or even with an app on your smartphone. Unlike traditional betting, you don’t have to “win” to come away with some cash. If you place a bet on the price of a share decreasing, for example. you can actually profit from the market falling. In some ways, it’s a more personal way of gambling. The more accurate you are with your bets, the more profit you will make. In addition, you can participate in live betting, which allows you to place and hold a bet at the current state of play and win money regardless of whether or not the end result changes. This can work well when spread betting on sporting events.

 

Tips

If spread betting firms offer demo accounts, then take advantage of it. This is a great way to practise this form of betting without parting with any of your hard-earned cash. Start small with your bets until you get the hang of how it works, and then consider increasing your wagers. Do your research and study the way the market changes, particularly if you’re not already familiar with the process. As is usually the case, knowledge is power and knowing more about the ins and outs of spread betting can only help you succeed at it.

Steven Robertson works nine to five but is determined to make his money work hard for him and enjoys playing the markets in his spare time.

 

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