Main Features of Spread Betting

Why is spread betting different from other "normal" forms of trading? After all isn't that what any trade or investment decision is - speculating on the future price of a financial instrument? Well spread betting has a number of both common characteristics and distinct features to the usual forms of trading. The key characteristics of spread betting are as follows.

Spread betting is tax free
In the UK, where spread betting is predominantly based, all profits generated through spread bet trading are tax free for UK residents. At the time of writing it is also the case with some other countries like Sweden. This means there are no capital or income taxes payable. This can be a double-edged sword as any realised trading losses are not tax deductible. The tax position of trading gains made via spread betting for traders who are not UK residents is likely to be different, so non-UK spread betting traders should contact the tax authorities in their own respective country to clarify how spread betting gains are dealt with for tax purposes.

Spread betting is a margined product
Spread betting is a margined product meaning that a position can be taken with only a fraction of its full value required as the initial deposit. The result of which is that very large profits can be made from a relatively small initial stake. In order to place a trade, an initial deposit called "initial margin requirement" (IMR) needs to be paid. This margin payment is can be as small as 1/10th or even 1/100th of the full value of what is being purchased. Margin trading therefore allows a trader to take a much larger position than would otherwise be taken with the amount of the initial stake, which can result in much greater profits than would otherwise be achievable. Conversely, it could also mean much greater losses than would otherwise be incurred.

Spread betting is (almost) fee free
With spread betting there are no broker commissions or stamp duty (UK) to pay. Although there are no direct fees payable, spread betting companies, or firms, make their profits from the spread offered, which in most cases nowadays is similar to the spread size on the underlying financial product being traded. However, it is worth pointing out that if a spread bet trade is held overnight there is usually a small overnight financing charge payable.

Spread betting is possible on a vast range of financial products
The majority of spread bet trades are taken on equities (stocks), but because the range of financial products that can be traded via spread trading has greatly increased in the last few years the percentage of equity (or stock) spread bets have decreased relative to other spread trades placed. Other popular spread bet trading products now include Forex (both Spot Forex and Forex Futures); global stock indices, eg, DAX 30 index, FTSE100 index, NASDAQ index, the Dow Jones; individual financial stock sectors, eg, Banks, Telecoms, Pharmaceuticals; individual global stocks, eg, individual companies on the S&P500 or FTSE 250; futures and options; commodities and even interest rate futures. It is also possible to spread bet on the value of house prices!

Spread betting with familiar order types
For most investors the types of spread bet orders will be very familiar. Apart from the usual instant execution order, where the trade is executed immediately, other types of orders include OCO (One Cancels the Other) orders, Stop orders (guaranteed and not-guaranteed, and Limit orders.

Spread betting long and short
With spread bet trading it is possible to go "short", or sell an underlying financial instrument as it is to go "long" or buy an underlying instrument (assuming that a regulator does not prevent short trading as actually happened during the recent financial crisis).

Trade on International Financial Markets with No Currency Exchange Risk
When you place a spread bet trade on a financial instrument for example on stock listed on a foreign stock exchange, you will place a bet, or trade, using the base currency of your chosen trading account (£, $, or €) held with your spread betting company. The whole of the trade will be handled or processed in your chosen currency thereby removing any potential currency risk.

3 Advantages Of Forex Trading Over Stock Investing

We should really stop looking to other ways to get money and get on this liquid market. The funny thing is, the advantages of Forex trading have always been there, the buoyancy of other markets and investment opportunities for the past few years have actually pushed it into a sort of obscurity. Now that the credit crunch is here and market trust has wavered to the point where investors have turned tail and run away, the Forex market has actually started to shine with a light that in fact has always been there. This article will not try to convince you of anything, but it will tell you four reasons why you should shift your energy to Forex online trading to make some real money.

Being available 24 hours a day, it makes it very advantageous thus it can accessed at almost any time. Add to that the ease and accessibility of the internet and you get complete control and command over your investments and you can check even the smallest variance in the market at any one time. This is the dream of any investor and to someone dealing with a lot of money, a 12 hour wait could mean horror - things could go bad overnight and you would want to be able to nip any impending storms in the bud.

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Start making money on both ends of the market. The Forex market is unique in a certain sense because you can make money on currencies that are going down and currencies that are going up. Market positioning is very flexible in the buying and selling of money worldwide and the good thing about Forex is the ability to have a duplicity market, where a downturn in the market could mean profits for you.

The Forex market, ulike other markets, is a highly predictable one and price movements, to experienced brokers, work in a cycle and a pattern that actually work out in a general map cycle that can be plotted and predicted easily. Yes, Forex markets are especially volatile; disasters occurring on the other side of the globe could potentially mean more than a 1 point drop in a currency you are backing, which means you stand to lose a lot of money. Those sorts of disasters can be quite easily averted with a bit of experience and a bit of market watching. There are also strategies aplenty and you can pick up different ways to forecast the market with tried and true methods.

Online trading also cuts away a lot of the unnecessary, physical complications you might have if you had gone down the traditional time. In the world of Forex trading, everything from order execution to general and specific enquiries is done electronically and an Internet based platform is the best way for you to interface with the market. You lose the hassle of delays and noisy open floor outcry pits, and best of all, you can make money from the comfort of your home.