What is Spread Betting?
Spread betting is a tax free cost effective alternative to traditional share trading. It allows you to speculate on the movement of stocks and shares without using a stockbroker, therefore you do not have to pay commission or fees. We make a spread around the live, underlying market price and you can bet on whether this market will rise or fall.
Betting on the movement of stocks and shares allows our customers the opportunity to generate substantial profits on both rising and falling markets. Spread betting therefore offers all the advantages of speculating on the stock markets and much more.
Spread betting is most easily explained through an example - the concept is the same whatever the market. Imagine that in early August you believed the FTSE 100 index's value of around 6230 was too high and that share prices would fall over the following month or so. Accordingly, check your trading platform for a quote, where it gave you a FTSE 100 price for the third week of September of 6165-6175. Based on that spread, you had two choices.
| 1. | You could have bet on the Footsie falling below this level, by selling the index. |
| 2. | Or you could have bet it would be higher than this in September, by buying the index. |
Either way, you bet by staking a sum, say £10, per point. As you expected the Footsie to fall, you took the former option. Now imagine that on 17 September, the FTSE 100 actually closes at 6020, 145 points below the City Index spread. On this basis, your profit would be £1,450, which is 145 times your £10 stake. In fact, you do not have to wait until 17 September to book your profits, you can always close a trade early, or place a Limit Order. Gamblers can close their bets as soon as they become profitable. If the index had stood at 6050, say, on 1 September, you could have closed out your bet by reversing it - buying points from FXLRmarkets.com.
Risks
However, the downside of spread betting is that the potential for large gains is equalled by that for large losses. Let's go back to the earlier example. Imagine that you had bought, rather than sold, in the example above. Your loss would have been a nasty £1,550 - £10 times the 155 points the Footsie finished below your opening spread. It is important to note that in spread betting gains and losses are geared. You are effectively trading on margin. The more right you get a bet, the more you win. But the more wrong you are, the greater your losses. It s very important you understand this. Only ever bet with money you can afford to lose.
General
The enemies of spread betting and its CFD cousin argue that there must be something wrong with a product that does not involve investment in the underlying share. They tend to feel that it's purely a gamble, that it's not an investment and it robs the market of liquidity. However in the case of CFDs, money finds its way into the markets via hedging. The supporters of spread betting, always point to the flexibility that it offers investors and traders. It allows them to go short (sell) or long (buy) and to put money on a huge range of different assets and markets. More importantly and certainly more beneficial, there is no stamp duty to and no tax on capital gains.
Conventional wisdom states that in a falling or 'bear' market only the brave, the mad or those with inside information and wealthy individuals will trade shares. The monthly figures from the IMA (Investment Managers' Association) and APCIMS (the Association of Private Client Investment Managers and Stockbrokers) also support this view. They indicate that trading volumes in ordinary shares point, it is a source of absolute amazement to me that a government and chancellor who have been so diligent in imposing stealth taxes should have allowed the tax discrepancy to continue unchallenged.
True, if the Inland Revenue wanted to get nasty it could make life miserable for frequent traders, but so far this doesn't seem to be a bullet it wishes to bite. However, in the volatile markets that we have encountered more recently, especially this year, spread betting has provided real opportunities for individuals to make huge gains irrespective of the direction the indices take.
Of course spread betting is not risk free. Like any other investment, investors can also lose money when investing via spread betting. But, to some, whilst the title 'Spread Betting' could conjure up an image of straight forward gambling, most would argue that the risk profile is entirely different to a bet on the dogs in the 4.15pm race in Peterborough.
The general investor has definitely picked up on this and far from being daunted by today's volatility in the markets, is plunging head first into active market spread bets several times a day. He has realised the real opportunity of being able to use this as a tool to make money in a rising market and take advantage of a falling market. Indications from the major spread betting firms such as FXLRmarkets.com state that over the past 3 years turnover has doubled with this year alone up some 60% on last year. This should be a clear indication to all investors that this is where real money can be made.
So let's ask, what are the reasons for this? Well, the historic enemy of many investors 'Market Volatility' has actually encouraged daily bets on share price movements. The fact is that as share prices fall, it is as much as an incentive to place a bet as it is with them rising.
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FXLR Markets, www.FXLRmarkets.com, has been specifically created with the individual trader. Its simple and easy to follow layout benefits both the professional and those new to spread betting. FXLR markets online financial spread betting platform is the perfect complement to FXLR Forex Live Trading Room and any trading software. You can even start with a free £10,000 demo account, so you can be sure you are doing well before you trade with your own cash. At FXLR markets the spreads are permanently tight to give you more room for profit. They believe their spreads are far better value than any of their competitors thus giving you more opportunity to win. If you're new to spread betting take advantage of our Demo Account which offers a selection of products and mirrors the functionality of the FXLR Forex Live Trading Platform. After you have practiced with your £10,000 demo account you can then use your own cash. And, FXLRmarkets.com actually match your first £100 deposit - FREE.
FXLR markets Offers:
| • | One of the easiest, instant online spread betting facilities currently available. |
| • | Commitment to quoting amongst the most competitive spreads in the industry. |
| • | Unique account management system (stop losses) ensures that you can trade with confidence in the knowledge that all your positions are protected against unforeseen market moves (stop losses are not guaranteed).* |
| • | Friendly help and assistance from our experienced Support team. |
| • | Demo Account that allows you to practice spread betting and test strategies risk free! |
| • | And with these advantages, it's no wonder we attract discerning professionals too! |
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