Wednesday, January 4, 2012

Spread betting guide

By Becky Hartson


Spread betting is a term that many people will be familiar with but few will be able to explain. Despite its increasing popularity, knowing how to spread bet and how to avoid losing large amounts of money is a skill which takes far more practice than traditional-style betting.

In a tough economic climate, spread betting offers investors the chance to continue to make money even when it is difficult to profit from other types of trading. But although it may sound tempting, caution must be exercised because unlike traditional betting, it is possible to lose a lot more than the original stake.

It is possible to spread bet across a wide number of different markets, from sporting events right through to the financial markets. Although the knowledge required may be different for each type of bet, the concept remains the same for each. There is potential for very significant gains but unlike a regular wager, it can sometimes be necessary to follow the trade and close it early if it looks as if a lot of money could potentially be lost.

With such propensity to lose money, it is vital to learn how to spread bet properly. With a regular fixed odds bet, once a stake is chosen and placed, the total potential loss is known. This is not the case with a spread bet because the stake specified applies to each point of movement. Therefore if there is a big swing in the wrong direction it is possible to lose a very large amount of money.

As well as sports events, financial markets are a popular target for spread betters, as there is a great choice. It is possible to place a spread bet on any one of a number of targets, including how an individual stock will perform as well as the movement for any given indice. Wagering whether it will move up or down as well as the range in which it will close are all possibilities for a spread bet.

One of the advantages of a spread bet on the financial markets is that it is feasible to have a mixture of both short and long term bets. As well as placing a spread bet about the performance of an index on a given day, it is also possible to bet upon its performance over a period of time. Regardless of which type of spread bet is placed, it is essential that any money is disposable income as there are no guarantees over potential return.

Spread betters are treated very differently by the tax man and this is one of the biggest advantages this form of investing holds over all others. Any gains may be enjoyed completely free of both Stamp duty as well as Capital Gains Tax, a marked contrast to other forms of profit made from shares. In addition, as a spread bet is only ever a wager about what might happen, there is no actual share ownership which simplifies the position.

Spread betting is inherently suitable for those looking to make a significant profit from investing money and should not be considered in the same way as a casual wager at the local betting shop. Anyone considering getting involved should ensure that they have the finances to support such a venture and understand that in order to make money, it takes a lot more than a lucky four leaf clover to spot a winning trade.




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