Beginner's guide to spread betting

The Spread Betting Market

Spread betting has turned out to be one of the fastest growing financial sectors in the UK. Due to the ease of use, the possibilities for managing risk and the fact that it doesn’t attract commissions or taxes, it has come to be the preferred method of going into the stock market (or any other asset that can be tracked financially) for many individuals.

However, many people are befuddled by the large number of spread betting companies available. Its popularity has made the market explode and this has increased competition to the point where it’s getting difficult for a beginner to figure out which firm to choose.

There are advantages though in having multiple spread betting accounts with many different firms. Let’s take a look at some of them.
Finding the tightest spreads

The difference between the bid and the ask (or the buy and the sell) price is called the spread. This allows the firms to cover their expenses and make a profit. It makes sense that the smaller the spread, the faster an individual can recover his or her investment since the buy price is always higher than the sell price.

Having multiple accounts allows one to shop around and make a thorough comparison between the various spreads available and choose the best deals. This is specially true if you need to squeeze out every last drop of profit.

Specialization of types of spread betting

There are different types of spread betting and some firms specialize in specific types of bets. Since one of the advantages of spread betting is the ability to bet on any type of asset, you may want to hold accounts with various firms that specialize in each particular type.

Minimizing Loss

Spread betting is risky. You can lose money as quickly as you make it and because of this, every investor needs to put in place a “stop loss” system where you can eject the market when it goes too much against you.

For example, you can instruct your firm to automatically extricate you if you lost more than X pounds. Different spread betting companies have varying policies when it comes to stop loss systems, and you should know when to use which depending on the circumstances.
Deposit Margins

To cover the risks of investors losing too much money, each spread betting firm has a deposit margin. There’s a huge range of deposit margins depending on the firm involved and in some cases, it can go up to 100% of the value of your bet. If you begin to lose too much money, the company will contact you for a further deposit margin so you can continue betting.
Comparing Accounts

Choosing a spread betting company means performing a thorough comparison of all the various parameters that have an influence on your profits. You may like some policies of a particular firm, and yet hate a few of the others. This is one of the reasons why having multiple spread betting accounts is handy. You can pick and choose the offering that most suits the given situation at hand and get the maximum benefit.