Financial Spread Betting has been available for over 30 years however in the last 10 years its popularity has really exploded. Tens of thousands of retail investors everywhere from the UK and Europe, to Australia and South Africa trade shares, currencies, bonds and commodities on the financial stock markets daily. Here are some of the reasons why it has become so popular.
Tax Free in UK
Unlike traditional share dealing, you pay no taxes on your profits. They are not considered profits under tax laws, but a winning bet, and as such Capital Gains Tax does not apply. The transactions also involve no stamp duty, as the underlying share or commodity is never actually purchased – it’s just a bet on whether or not the value will rise or fall.
No fees or commission
Spread-betting companies don’t charge commissions or brokerage fees. They include all costs in their spread. The last few years competition has become fierce with spread as low as 1 point.
Profit from rising or falling markets
One of the biggest advantages of spread betting is that it doesn’t matter in which direction the market is going – you can still make money. A profit can be made in a falling market as well as in a rising one. Also with fixed odds bets you can also profit from a range or dull market effectively betting on a market to do nothing.
Trade on Margin
Spread betting is leveraged, which means you only need to bet a small percentage of the value of your trades. You can make the bet using a fraction of the money it would require if you wanted to buy the actual shares from a stockbroker. This is also known as gearing. You can also choose the size of your stake, often much smaller than would be the case if you were speculating on the underlying market.
Wide Range of Markets
You can access thousands of markets from one account stock Indices, currencies, bonds commodities, shares or even, in some cases, house prices. Most Financial Bookmakers allow you to trade directly from a website without the need to download any additional software.
24 hour access
Some spread betting companies are open 24 hours a day from Sunday night to Friday night. This allows trading in hours even when underlying markets are closed. Dealing can be done online or by phone. You can now also trade with your mobile phone or smartphone including apps that are available for the Iphone, Ipad and Blackberry devices, so you can trade whenever or wherever is convenient for you.
Control your losses
You can set limits on the losses you are prepared to take. These are known as Stop Losses, or Limit Orders. They offer protection against massive losses if the market moves against you. Also most Financial Bookmakers offer Controlled Risk Bets (CRBs) meaning that even if a stop cannot be filled in the underlying market you would still be protected.
Spread-betting can be used as a hedging tool to offset against losses in your other portfolio. For example, if you own shares which are decreasing in value in the short term, you can bet on the value falling, and make a profit to offset against the loss in value of the shares you hold. Many investors use spread-betting to hedge against losses. Another popular hedge is Gold, say you had some Gold coins and your worried that Gold will fall but do not want to sell their coins you could spread bet gold to go down which would protect you.
The spread betting industry is tightly regulated. In the UK, this is by the Financial Services Authority (FSA). It means strict rules apply and the firms offering it are secure and safe.
Before you try Financial Spread Betting it’s well worth getting some good advice and training. Spread Betting Veteran Vince Stanzione has been trading for over 25 years and has produced a course “Making Money From Financial Spread Trading” which is a 160 page workbook, 2 and half hours of DVDs and a members only website. To find out more go to www.fintrader.net