Spread Betting Trading

What Is Spread Betting?

Spread betting is a leveraged product. This means that, in order to make a comparatively large market exposure, you only have to put down a small deposit. It also makes spread betting a form of derivatives trading, affording you the opportunity to take a position on the market without requiring a large investment in the underlying asset.

Simply put, spread betting is a means of speculating on the rise or fall of an asset and, with over 10,000 markets upon which to take long and short positions, it’s a form of betting that can be slightly confusing and risky to newcomers. So first, let’s have a look at the basics:

What is the Spread?

What is the spread

In the same way that other forms of trading decisions are informed by two prices (like currency pairs), the spread is the difference between the BID price and the OFFER price. In spread betting, the bid price is the value at which you can opt to go short if you anticipate a fall in the underlying market, whilst the offer price is the value at which you can go long if you predict the market price to rise.  

As a result of the spread forming the difference between the bid and offer prices, the values at which you buy and sell will always be slightly higher and lower than the market price.

Deciding on Your Stake

The stake in your spread bet is the amount you are betting per incremental movement, or ‘point’, in the market. So when the market moves a single point in a given direction, you either win or lose that amount. In order to minimise risk therefore, you’re going to have to be honest with yourself about how much you can afford to lose if your predictions don’t work out; start small and work your way up.

Whilst the potentially large and quick profits can seem in enticing, it’s important to remember that those profits can just as easily turn into loss, and without the capital to support your bet it’s easy to find yourself in trouble. The high leverage available to you through spread betting can be a fickle friend in this regard, so it’s worth practicing before investing any of your own money. To get a better feel for reading the spread betting markets, consider trying our spread betting comparison page.

Try not to feel intimidated by the world of spread betting; our support team are here to see you succeed and give you confidence in your own ability.