Spread betting is a hugely popular way to play the stock market, and a way you can play without actually owning and trading the stocks themselves. Instead of dealing with them, you bet on what you think they will do, with the hope that you will buy low and then sell them when they are high for a profit.
When spread betting you choose a stake size per point of movement, and this will determine your profit and loss for that particular share, based on how much their rise or fall in value. If the market moves in the right direction then you will make a profit, while if it moves in the wrong direction you will be left with a loss. Forex trading is a popular method of spread betting, and there are many Forex trading strategies you can follow if you are a newcomer.
Spread Betting – How Does it Work?
When you place a spread bet, you take the spread price that is currently available and you choose your stake. For example, the spread price you take is 135 and the stake per point is £2. For every point increase in the price you gain £2, and the same happens for every lost point, you will lose £2. In this example, if the price goes from 135 up to 140 then you will be £10 in profit, if the price goes down to 125 from 135 then you will make a loss of £20.
Spread Betting – What is the Spread?
The spread is something that you will here experienced traders talk about when they are describing a market, but it is something simple and easy to understand. When you are looking at a market, you will see two different prices, the buy price and the sell price. The gap between those two prices is the spread, and this is what people refer to.
Spread Betting – Falling Markets and Reverse Trades
The general way to play on the spread betting markets is to buy low and sell when something raises in value and it is higher. However, you can do the reverse for this, although obviously there are risks attached. There are many new matched betting offers available with bookmakers that will help you complete reverse trades like that.
To make a trade like this, you have to do completely the opposite to what you normally would, which means the first bet you make is to sell something. Then, if the share price lowers as you expect it to, you can round off the trade buy buying at the smaller price. The profit you make is determined by the gap between your buying and selling price, and this type of trade shows that you can perform those two tasks in any order.