Initially, there were bookmakers, in the country of the sports betting: Great Britain. A similar system was adapted for the Trading: the Spread Betting.
It's a sophisticated system of opening positions on the financial market. And it extends to a number of major trading platforms. Spread betting is indeed a trading method that is the transposition, in the world of finance, of traditional sports betting.
Spread betting and CFDs
In the sports world, it's possible to bet on almost any sports: the victory of Arsenal against Manchester United, the result of Roland Garros Tennis game, the winner of the Grand Prix Formula 1 Dubai, Horses racing, Cricket's game ...
Spread Betting, applied to finance, is also a bet. It goes through a financial instrument and it deals with currencies, stocks, indices, commodities or futures
. Its operation is hyper-simple. If you bet on the index, you give it a value, for example, 1 euro the point. That gives us, at the end of August 2018, a CAC40 with 4285 points and thus 4285 euros. This means that each additional point can earn you one euro if you bet on the rise, or make you lose a euro if you bet on the downside.
The system works the same way on the currencies. Rather than buying or selling a specific lot of currency, as is the case on the Forex, it is a question of placing a bet.
For example 20 dollars per Pip. Whenever the USD / EUR exchange rate moves, the "player-investor" will earn (or lose) $ 20 per Pip, depending on whether he has bet upward or downward. In our case, a 10 pips increase in the USD / EUR rate will earn him $ 200.
Differences between Spread Betting, and the other Trading ways
The Trading offers are very different. With the Forex, for example, investors trade currencies against each other. Without ever physically holding them, you take advantage of the exchange rate changes to extract a profit. Binary Options, even if there are on the decline nowadays, allow you to speculate on currencies, commodities, stocks and indices. But by limiting the losses incurred. Spread Betting, it's much more sporting and allows you to bet on the movements of the Pips.
The first advantage of Spread Betting is the modest investment. Since it's the broker who transposes the price in euros, and that it has interest in making it as accessible and easy as possible.
The second is the absence of transaction fees. This does not mean that there is no commission. Simply, they are integrated into the price of the product, through a spread. A system that brings Spread betting closer to the rest of the Forex
The third is the ease with the trading strategies. With, for example, stop loss orders, the possibility of "short" the position. It allows you to gain upwards or downwards, and the possibility of playing a leverage effect, which may in some cases up to x10.
In Great Britain, this system has another advantage, not negligible: absence of taxation. The financial bets as Spread betting are considered like sports bets and are the concerns of the broker. The payment of the tax is directly paid to the British Treasury.
In Spread Betting, the possible losses could not appear clear enough. This is not totally true: the trading platforms are here to provide you with the information and the assistance that you need.
Spread betting offers numerous advantages over conventional trading, including the ability to go short anytime, tax-free profits*, margined trading and more.
Trading with smaller amounts of money, which can be great for beginner investors. Instant access to a huge range of markets. Unlimited losses:
Therefore ensure you make use of stop losses and other risk-control measures.
Wide bid-offer spreads:
Spread-bet brokers make their money from the spread; the bid-offer prices quoted are often wider than if trading the cash product.
If you have a good credit rating, spread betters offer credit accounts. Avoid getting the credit from them!
The reason why we made for you a selection of ultimate Spread Betting platforms. Enjoy and lets us know your feedback. Good Luck!