Fundamental Spread Betting Advice: Instead of dealing in shares, commodities or forex, you can profit on the rise and fall in these markets by spread betting. Unlike dealing, with spread betting you never actually buy or sell the instrument. You just speculate as to which direction the price will move and place your bet accordingly. There are many spread betting strategies you can employ to ensure your speculation is more than just guess work. The amount of your profit or loss is determined by the degree to which your speculation was correct. The more the price goes the way you expected it to, the more profits you make, but the more it goes the opposite way, the more losses you accumulate.
The spread part of ‘spread betting’ is effectively the charge made by the spread betting firm to you for placing a bet. Instead of giving the market price for the instrument you are betting on they will give you a spread, say 4031-4033. If you are speculating that the market will rise, you will only make a profit when the market price is greater than 4033. As spread betting is akin to gambling any profits you make are tax free but consequently any losses you make are not tax deductible.
Spread betting has certain advantages over other ways of dabbling in financial markets. Firstly you can bet on the market going down as well as up. Secondly you can use leverage to open bets with quite low deposits. This does mean that you can lose more than your initial deposit however. To cap your losses you can pay a premium to ensure those bets are closed out once they reach a level beyond which you deem unacceptable. There are also many markets you can make bets on. The increase in the popularity of spread betting has been matched by an increase in the number of firms offering their services. As such if you shop around you should be able to find tight spreads (and therefore reduced fees) on many products.
There is much to learn if you are thinking of trying this as a new venture so you are well advised to invest in some form of guide to financial spread betting.
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