Financial Spread Betting has been around for many years. It is only in the last decade though that Financial Spread betting has really risen up to become what many people consider the best way for most UK based retail traders and investors to participate in the financial markets.
Financial Spread Betting
Financial Spread Betting has grown in popularity down to one basic concept which funnily enough is what drives all markets around the world. This is SUPPLY AND DEMAND. We can break this down to three key reasons:
- The internet has involved at such a pace that it is now possible for the majority of us to access real-time data directly on our desktop computers and mobile devices. This in turn saw spread betting companies start to offer free data services to their clients (Supply) which in turn encourages retail traders and investors to get involved in Financial Spread Betting. This then drove more (Demand) for the spread betting companies to offer betting charting solution and trading tools.
- With the tools now being available and the recent turmoil seen in the Dot Com bubble burst and the Financial Crisis that started in 1997, people have been making the choice to take control of their own finances and have seen an opportunity to take advantage of the short term volatility.
- Lastly, the Financial Spread Betting industry has been growing at a very fast pace and as such competition has increased dramatically resulting in reduced ‘spreads’ which is fantastic for us because it means our trading costs have reduced and reduced quite substantially over the last 2 years in particular.
Those people taking their first look at Financial Spread Betting often find it difficult and confusing at first but once you understand the basic concepts and gain a little experience it soon becomes easy to get to grips with. Refer to my other posts for a basic run down on how Spread Betting works in general.
Only a small amount of money is required to to start Financial Spread Betting
One of the best things about financial spread betting is that only a relatively small sum of money is needed to get started. You can literally start with say £100. How come so little money? It’s all down to leverage and the fact that you are not charged a fixed commission for each trade you place.
The financial spread betting companies make their money by adding on a small amount to both the bid and offer price also known as the spread. The amount is normally fixed no matter what size trade you make.
Compared to other methods of Trading for Financial Spread Betting
When trading normal Stocks or futures markets you usually get charged a commission fee for each transaction you make which can mount up over time resulting in diminished returns if you only trade in small size. This is where Financial Spread Betting comes in; because a small amount is added to the spread price you don’t see any commission charges as such. Obviously there is a cost bust for the small time trader; this is much lower than normal trading commission costs.
There are other benefits too such as the wide variety of markets you have access to. You can trade shares on any stock market in the world, all the major commodity markets, ETF’s and a whole host of other obscure markets such as the price of wine and the housing markets etc… Also note that trading normal stock in the UK incur stamp duty costs and any profits made also get taxed. Not so with Financial Spread betting; because the UK government class Spread Betting as gambling these taxes do not apply. Note, this is true at the time of writing, so please always check with your local tax office to make sure that you comply with the financial spread betting tax laws as they may change at any time.
Go short or long with Financial Spread Betting
We all know that the markets never go up in a straight line all the time. Financial Spread Betting gives us the opportunity to trade in any direction we choose. If we think the market will go down, you can short the market hoping to makes a profit as price falls. Conversely, if you think the market will then turn around and start heading up you can close out you short positions, bank the profits and then go long the market and gain more profits as price heads back up. Sounds simple and in theory it is. Putting this into practice though can be another matter 
In summary, Financial Spread Betting is a fantastic way to trade a huge range of financial markets. You pay less tax on your winnings. You don’t have to pay for expensive trading tools and charts and it is available to anyone in the UK who fancies a flutter. Financial Spread Betting ROCKS.
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