Financial Spread Betting - Gambling on Stocks
Financial spread betting can be a way of gambling on the stock market without having to own stocks and shares themselves; as such one of the chief advantages that it has over trading is that it can be done any time of the day, whether the markets are open or not.
On top of this, spread betting is tax free and often allows you to leverage a great deal more money than you actually put down in the first instance.
This works both through the use of margined trading and through the spread itself - let me explain.
Spread betting involves betting on whether you think a stock will rise or fall in value in a given period of time.
If you think a share is under priced for instance, you are able to 'buy' at a certain number of pounds per point (with shares, a point is equivalent to a penny).
So, if you buy at £20 per point and the share goes up by 2p then you just made £40.
If it falls by 2p then you just lost £40.
It's fairly simple, but the money can spiral out of control pretty quickly.
As a result, spread betting always involves a certain amount of margined trading.
Your margin within financial terms, is in part a deposit that you make in order to cover your potential losses on a trade.
This is so that if you place a bet at £20 per point, and the stock falls by ten points, there's a buffer to ensure that the company is repaid the money that you owe them.
With financial spread betting you are usually only required to place 10% of the value of your trade down as a margin.
Usually there will also be a facility called a "stop loss" which stops the bet after you have lost a certain amount of money and a 'stop win' which does the same after you have made a certain amount of money.
Overall, financial spread betting is a very risky, short-term investment strategy, the main benefit of which being that it is tax free.
The main drawback is that you can lose far more than you bet, and that you will need to very carefully manage your position in the market in order to ensure that you do not lose any money.
Although risky, one can do well if they study the numerous strategies and master their own techniques.
On top of this, spread betting is tax free and often allows you to leverage a great deal more money than you actually put down in the first instance.
This works both through the use of margined trading and through the spread itself - let me explain.
Spread betting involves betting on whether you think a stock will rise or fall in value in a given period of time.
If you think a share is under priced for instance, you are able to 'buy' at a certain number of pounds per point (with shares, a point is equivalent to a penny).
So, if you buy at £20 per point and the share goes up by 2p then you just made £40.
If it falls by 2p then you just lost £40.
It's fairly simple, but the money can spiral out of control pretty quickly.
As a result, spread betting always involves a certain amount of margined trading.
Your margin within financial terms, is in part a deposit that you make in order to cover your potential losses on a trade.
This is so that if you place a bet at £20 per point, and the stock falls by ten points, there's a buffer to ensure that the company is repaid the money that you owe them.
With financial spread betting you are usually only required to place 10% of the value of your trade down as a margin.
Usually there will also be a facility called a "stop loss" which stops the bet after you have lost a certain amount of money and a 'stop win' which does the same after you have made a certain amount of money.
Overall, financial spread betting is a very risky, short-term investment strategy, the main benefit of which being that it is tax free.
The main drawback is that you can lose far more than you bet, and that you will need to very carefully manage your position in the market in order to ensure that you do not lose any money.
Although risky, one can do well if they study the numerous strategies and master their own techniques.
