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Hedging Your Bets With Financial Spread Betting

Todays Date: November 17, 2018

Many traders in the stock market have lost money, while few have made money. And no matter how easy online e-books say dabbling in this market is, it actually isn’t. Financial spread betting is another matter entirely, it is a different way of trading in stocks and shares, and online traders are able to speculate on the prices of stocks and shares without any assistance from stockbrokers.

The beauty of being able to speculate on the movement of shares and stocks without the assistance of a stockbroker is that you don’t have to pay their commissions. Basically you make a spread around live market prices and place a bet on whether the prices will drop or rise.

The word “spread” describes the sell (bid) of buy (offer) price. The price is calculated by the company offering the spread bet. Essentially they take an existing share price for example the FTSE. If the price of this stock is 4729 for example they will quote a price of 4727 – 4731. The speculator has to decide if the price will go up or down and places their bet accordingly.

To open a new position in the market a very small deposit is required, generally about dollar, euro, pound10 – 40. Each bet is on each point or tick in which the market moves, either up or down. The stake is usually 1 on each point of movement and will represent either profit or loss.

Each financial market has their own maximum stake allowed, so you bet your 1 pound, dollar or euro per tick (point), choosing a bet that the market price will increase or alternatively, drop. If your wager is correct then you win or rather make a profit which is the amount of your wager or stake multiplied by the amount in which the market moves in your favor. If you wager is incorrect you lose your stake multiplied by the amount of points the market moves in the opposite direction.

Because of this fact, the financial spread better has to understand that the market is often able to move quite substantially in the opposite direction to the wager made. This can mean a substantial loss, but by the same token, if the market moves in the direction predicted, a substantial profit can be made.

In the UK profits from spread betting are considered to be the winning of a “bet” and this makes them free of Capital Gains and Income Tax.

It is highly recommended that trader who is new to spread betting open a demo account first before signing up for a live trading account and depositing funds. The demo system will mirror exactly what happens in the live trading account and will come with a beginners guide to the system.

Being exposed to the spread betting system with no risk involved is the best way to learn all about it. Only once the trader is confident that they have the concept firmly in their grasp should they consider opening a new position in a live account. Make sure the company you choose provides a demo account and beginners guide!

Before starting in Financial Spread Betting Strategies, check out the authors review on ODL Markets Trading

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