Although you might be used to gambling on sports, have you ever considered financial spread betting? The main concept is that you will be speculating on whether the value of a financial asset – like stocks, gold, or oil, will increase or decrease in value. If you speculate correctly – you’ll make money.
In this guide, we explain how financial spread betting works from top to bottom and show you how to get started today.
Launched in 1999, Spreadex is the UK’s leading spread betting site. The platform offers two core products – sports spread betting and financial spread betting. Regarding the latter, you will be able to speculate on a wide range of financial instruments – which includes thousands of stocks and shares from 15 UK and international markets. This means that you can trade companies like Apple, Facebook, HSBC, Royal Mail, and more.
You can also trade commodities like gold, silver, and oil. Other popular asset classes supported by Spreadex include bonds, ETFs, indices, and forex. When it comes to trading fees, this financial spread betting site charges no commissions. Instead, the fee you pay is dependent on the ‘spread’. As we explain in more detail later, this is simply the difference between the ‘buy’ and ‘sell’ price of the asset you wish to trade.
If you like the sound of financial spread betting but are a complete novice – you’ll be pleased to know that Spreadex does not have a minimum deposit amount. This ensures that you can try financial spread betting with modest amounts. Additionally, to ensure you do not start trading with your eyes closed, Spreadex offers numerous guides and explainers on how financial spread betting works.
All markets on Spreadex can be traded with leverage, meaning that you can enter positions at a greater amount than your account balance permits. This can be utilized at a maximum of 1:30 on major currency pairs and less on other markets. Spreadex also offers interest-free credit limits, but this is dependent on your personal circumstances. Finally, your capital is safe at Spreadex, as the platform is regulated by the UK’s FCA.
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There is every chance that you are completely new to the concept of financial spread betting. If this is the case, we would strongly suggest that you do your homework first. In doing so, you will give yourself the best chance possible of making money from your financial spread betting endeavors.
In its most basic form – financial spread betting is a form of trading. This means that you will be looking to predict whether the value of a financial asset rises or falls in value.
Although the example above might appear somewhat basic – this is the essence of a financial spread bet. With that said, it’s not just stocks and shares that you can trade.
On the contrary, the best financial spread betting sites also offer commodities, forex, indices, ETFs, and more. If you’re new to these financial instruments – we cover them in more detail shortly. A major benefit of financial spread betting is that in comparison to traditional gambling, it’s not an ‘all or nothing’ outcome.
That is to say, when you are spread betting assets, your profits and losses are determined by how right or wrong you’re prediction was. For example, if Apple shares increase from $300.12 to $300.18 – that’s a price movement of 6 points. If you staked £1 per point, your profit would amount to £6 on this trade.
So now that we have covered the core basics of financial spread betting, we need to delve into the specifics in much more detail. This is crucial, as ultimately – financial spread betting is a lot more complex than traditional gambling. But, once you understand the fundamentals, you’ll likely appreciate that financial spread betting offers a considerable number of advantages.
Instead of predicting the outcome of sporting events like football, cricket, or rugby – you’ll be looking to speculate on financial assets. If you’re completely new to how the financial markets work, below we briefly explain the most popular assets that spread betting companies offer.
Ultimately, it’s best to stick with an asset that you understand when engaging with financial spread betting for the first time.
Perhaps, as a newbie, you might be best to stick with large-scale stocks and shares. Not only is there plenty of information available on the internet to help you decide whether the stock price will rise or fall, but major shares are a lot less volatile than other assets.
Once you have decided which asset takes your fancy, you then need to understand how price movements work in the financial spread betting arena. Put simply, the price of an asset will move in points. Each point that the asset increases or decreases will determine how much money you are making or losing.
As you can see, the concept of spread betting price movements is pretty straightforward. As such, we can now move on to the process of calculating your profits and losses.
Much like any form of trading, the amount of money you can make from financial spread betting is determined by how much you are prepared to risk. This is dictated by the amount you stake per point.
When starting out with financial spread betting for the first time, it’s best to keep your stakes modest.
The best financial spread betting sites allow you to trade without paying any commission. This is because the platform makes money from the ‘spread’.
In its most basic form, the spread is the gap between the buy and sell price of the financial spread betting market you are trading.
Once you have established what spread you are paying (which is usually clearly displayed by the provider), you know how much money you need to make to cover your fees.
In this example, that’s 10 points. In other words, you need to make gains of 10 points to break even. If your gold position increases by 30 points, this means that you have made net gains of 20 points.
A major benefit of financial spread betting is that FCA-regulated brokers like Spreadex can offer you leverage. This means that you are able to trade an asset with more money than you have in your spread betting account. There are, however, limits in place for retail investor accounts that are determined by the asset you are trading.
This stands at a maximum of 1:30 when trading major currency pairs like GBP/USD. 1:20 is offered by gold, non-major forex pairs, and major indices like the FTSE 100. You can get 1:10 on non-major indices and non-gold commodities, and 1:5 on stocks and shares.
If you’re completely new to spread betting leverage – check out the example below:
Now let’s see how this leveraged trade pans out:
We should make it clear that when you correctly speculate on the direction that the market moves, leveraged trades are great. After all, your profit will be multiplied by your chosen leverage ratio. However, this increases the risk on your trade – as your losses will also be amplified should you predict incorrectly.
In a similar nature to traditional sports gambling, spread betting markets always come with an expiry date. In the case of football, for example, this is when the game finishes. With spread betting, you can normally choose between a ‘daily’ and a ‘quarterly’ market.
The daily market will close at the end of the trading day. The quarterly market will close three months after the trade is placed.
If you are completely new to the intricacies of financial spread betting, then it’s best to opt for a quarterly market on your chosen asset. This is because you won’t be rushed into entering and exiting trades. Instead, you can keep the position open for hours, days, or weeks – and close it when the time is right.
Financial spread betting and traditional sports gambling have a core similarity – profits are never taxed in the UK. This is a great advantage, as ordinarily, investments are liable for several forms of taxation.
This includes capital gains, dividends, and stamp duty tax – all of which eat away at your potential profits. But, in the case of financial spread betting, you can speculate on assets in a completely tax-free way.
The reason for this is that spread betting is still classed as gambling – at least in the eyes of HM Revenue and Customs. Crucially, this is why financial spread betting markets always come with an expiry date – as it ensures that the industry retains its tax-free status.
You might be wondering whether or not it’s possible to do financial spread betting for a living. The simple answer is that there are many individuals that trade financial instruments on a full-time basis. But, those that make consistent profits are able to do so because they have dedicated many years to learning their trade.
After all, successful spread betting pros will analyze the markets to determine whether an asset will rise or fall in value. As a newbie, you might be tempted to simply ‘guess’ the outcome of a market – but in the long run, you will eventually burn through your capital.
As such, it’s really important that you do as much reading as you can on the subject. There are two key forms of analysis in the financial spread betting market – technical and fundamental.
Fundamental research is much easier to interpret for a beginner than its technical analysis counterpart. Ultimately, without learning how to analyze an asset – you will be at a major disadvantage when spread betting.
If you’ve read our guide up to this point, then you should now have a firm grasp of how financial spread betting works. Next, we need to discuss how we rank the best financial betting sites in the market.
The most important metrics that we look out for are as follows:
All in all – we found that Spreadex meets all of the above core metrics – which is why we think the provider is the best financial spread betting site for 2023.
Although you might be itching to get started with a financial spread betting site right now – it’s important that you have a strategy in place. This will ensure that you are able to trade financial instruments in a risk-averse way.
Below you will find a selection of financial betting trading strategies that are popular with beginners.
When you join a leading spread betting site like Spreadex, you will have access to thousands of markets. However, there is no point in trading a market if you don’t understand it.
After all, the overarching objective is to predict whether the asset will rise or fall in value – based on your own research. As such, it’s strongly suggested that you only trade spread betting markets that you understand. As a beginner, the best market to start with is stocks and shares from a major exchange.
This includes the London Stock Exchange, New York Stock Exchange, and the Nasdaq. In sticking with these three major markets, you will benefit from tight spreads and low levels of volatility.
We mentioned earlier that the best financial spread betting platforms typically offer a daily and quarterly market. As a beginner, we would suggest sticking with the latter. This is because daily funded markets require you to enter positions in a fast-changing environment – whereby you might only have a few hours to exit your trade.
But, when opting for a quarterly market, you essentially have three months to make your move. Having this flexibility will allow you to take your time and thus – exit the market when you are ready.
In order to make consistent gains from financial spread betting, you need to be able to determine whether the general market sentiment of an asset. One of the best most effective ways of doing this is to read the financial news as much as you can.
For example, at the time of writing, there is an ongoing scandal regarding a remote hack of a major US oil pipeline. This resulted in the pipeline being brought to a halt and in turn – US consumers were panic buying oil. Naturally, with demand on the increase and supply decreasing, this has resulted in the price of oil going up.
This is just one simple example of how being aware of real-world financial and geopolitical events can help you correctly predict the market.
It might be tempting to go ‘gung-ho’ with leverage when you are first starting out with a financial spread betting account. However, don’t forget that leverage will boost both your profits and losses. In fact, by applying leverage, you can have your position ‘liquidated’ by the platform if the position moves against you by too much.
Ultimately, while leverage can be an excellent tool to use in the future, it’s best left alone until you have a firmer grip on how risk management works.
This particular financial spread betting strategy isn’t something that can be learned overnight. Instead, technical analysis is an art that can take many months or years to master – as it’s a complex form of research.
But, there is a significant amount of information online – both in text and video form, that can teach you how to successfully deploy a technical analysis strategy. You will be taught how to read charts and look for trends by using technical indicators like the MACD or RSI.
Once you become proficient in technical analysis, you will be at a major advantage when spread betting. This is because you can enter positions throughout the day rather than needing to wait for a financial news story to break.
In summary, if you’re prepared to step outside of your comfort zone – financial spread betting is something well worth considering.
You’ll be able to speculate on financial instruments instead of traditional sporting events – which has the potential to offer a more consistent form of income. You will, however, need to perform lots of research to learn the craft of spread betting – as it’s not something you can master overnight.
If you’re looking to give financial spread betting a go – the best provider in the space is Spreadex. This FCA-regulated rated platform allows you to trade over 10,000 financial markets commission-free and at tight spreads. There is no minimum deposit and all markets come with the option of applying leverage.
The main concept of financial spread betting is that you will be predicting the future value of assets like shares, gold, oil, currencies, and bonds. Much like CFDs, spread betting derivatives can be traded with leverage. But, unlike CFDs, there is no capital gains tax to pay on spread betting profits.
On the one hand, gambling and spread betting on financial markets both require an element of risk. After all, you need to risk money to make money. However, financial spread betting is more aligned with trading, as, unlike gambling, it's not an 'all or nothing' outcome.
Fixed-odds financial betting is different from conventional spread betting. This is because you will be speculating on a binary outcome. For example, the platform might offer a fixed-odds market on Apple shares at $129.50 with an expiry of 4 hours. Your role is to determine whether the price of Apple stocks will be higher or lower than $129.50 in 4 hours' time. The odds will be fixed - for example, 10/11 on both sides of the market.
We found that the best financial spread betting site in the UK is Spreadex. This trusted platform offers thousands of markets across most asset classes - all of which can be traded commission-free and at tights spreads.
Yes - much like the traditional gambling markets, financial spread betting profits are tax-free in the UK and Ireland.
A daily funded spread betting market will expire on the same day that you enter your position. If your position is still open at the cut-off point, the spread betting platform will close it automatically.