It’s important to read this article if you want spread betting explained to you. Financial spread betting involves taking a position on how you think the value of financial instrument will change in the future.
The spread betting company will quote you a spread which is two figures and if you thought the instrument likely to go up in value you would buy at the higher figure and you would sell at the lower figure if you thought it likely to fall.
The degree to which you are correct in your forecast and the amount you stake per point determines how much profit or loss you make. Spread betting has three main advantages over traditional methods of trading.
Leverage. You pay only a small initial deposit and that gives you the exposure to a much larger position than you would if you had to actually take the same position in the real markets.
Tax-free profits. Profits from spread betting are free of tax in the UK.
Range of markets. The spread betting company will give you access to thousands of financial products, usually through a sophisticated online dealing platform
It’s important to note at this point that spread betting can be risky. One way of minimising risk is to put a stop loss on each bet and another is to never risk more than 5% of your total capital on any given bet.
If you’re interested in finding out more about financial spread betting it’s worth visiting IG Index at www.igindex.co.uk. Established in 1974, IG Index is the oldest spread betting company in the world.
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Risk Disclosure: Trading forex on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.