Beginners Guide to Spread Betting
New to Spread Betting?
The Spread Betting Trading Centre has compiled the following guide
to explain how Spread Betting works
What is Financial Spread Betting
A financial spread bet is a derivative, which means it is not a live share. Spread betting companies therefore allow traders to take a position against the value of an underlying financial instrument moving either upwards or downwards in the market place.
Traders never actually own the stock that they are betting on, they are simply speculating on the direction that the spread of the price of that stock will move. This means that a trader can make money on a stock that goes down, as well as on a stock that rises in value.
Spread betting is not limited to stocks and shares of corporations. There are many other money market instruments that have spreads which can be bet on. The financial instruments for a spread bet can be common stock, stock indices, currencies, or even commodities such as gold, crude oil or corn.
Spreadbetting Basics
In order to start spread betting the financial markets, it is worthwhile reminding ourselves of the basics of share trading:
A stock will either rise or fall in value
Shares are bought in the expectation they will rise in value so they can be sold at a profit. This is known as "going long"
Shares are sold on the fall, or expectation of a fall, in the value of a share in order to minimise loss.
