Business

Beginners’ Guide To Spread Betting

Wishing you a warm welcome to Spread Betting! Spread betting which is also known as financial spread betting offers a tax free instrument for speculation on the movements of financial market to the investors on both its rise as well as fall. Further it provides ground for trading of various commodities, currencies, indices, bonds, precious metals and equities from one account. While the actual spread is the difference between the price you buy and sell at, this is simply a derived product whereby the prices on which you are trading are actually derived from some underlying product.

Know to identify the market movements

Once you are ready to place the bet, you will go ahead or back depending on what feeling you hold about the next movement likely to take place in the market.  If you are lucky enough to have the market movements in your favors, you will incur enough profit whereas if the market movements go against your decision, then you will be at loss. This states that the market knowledge is quite essential for someone interesting in spread betting because only then he/ she can make moves in the right direction to cut short loss and make good profit.

Beginners’ Guide To Spread Betting

Margin requirement

Before you step ahead with spread betting, it is important to remember that this trading adheres to a margin known as Initial Margin Requirement. As you intend to invest, you will be required to deposit only a small percentage of the total position which the broker or the company has set. Making use of this leverage, traders like you opening deposit will enjoy greater exposure to a vast portion of the market underlying. However for this reason, you can also incur losses over your initial deposit. In order to safeguard this capital held in your account, it is essential to create your stop win or stop loss order.

Role of Stop Win and Stop Loss and various betting forms

Now as you go through this, you must be wondering how shall the creation of stop win or stop loss order help you to safeguard your account. Interestingly, a stop win automatically closes the position according to the order when at the verge of favor whereas a stop loss virtually does the same when you are expecting a loss. With spread trading, you can make bets in various forms like “contract month”, “Rolling bet” or “daily bet”. All these three differ from each other in their respective forms. While a contract month bet is opened and remains open upto 3 months and closes at a stipulated state, a rolling bet never close with the trading date ending and rolls on to the next day of trading. Hence it incurs additional charge which is why it is important to check for the cost with your broker in case you go for a rolling bet. Daily bet as the name suggest opens and closes on the same trading date.

Master over the related strategies before you open an account

So if you are new to this trading forum, it is important to understand all the terminologies and factors associated with it. Before opening your account, make sure that you have attained the requisite idea about margin trading, leverage, stop win and stop loss order as well as the market position. Keep a check on the expiry of your position and the announcements that might cause you to lose capital. As you are welcome to spread betting, these ideas will help you to earn profit.

About the author

admin

Leave a Comment