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Should forex traders consider spread betting?

So, how is spread betting different to normal trading?

There are many benefits to spread betting rather than regular trading. They include immediacy of outcomes, the cleverness of the trading programs, and the clarity of the pricing. The last is because the spread betting trader is only concerned with two prices: the buy price and the short price of the underlying instrument.

Other advantages include the flexibility of the trading sizes, and the simplicity of the trading mechanism on the online systems that the spread betting Brokers provide. A final but not unimportant advantage is that in many countries spread betting is tax-free.

With spread betting, you’re trading on leverage. That means you only have to put up a relatively small amount of money to trade a larger position, which is basically the same concept as with Forex trading. However, spread betting provides better control of your wins and losses. The flexibility it offers means that minimum trading sizes which can be quite small, so you can start trading small in a controlled way. This also gives the trader an incentive to be involved more often in the markets.

How Do I start Spread Betting?

In order to start spread betting you first need a spread betting broker that will give you access to such a product. Before opening an account, you have to do your own due diligence and only trade with a Broker that has a strong financial record and last but not least, your broker should be regulated by one of the top regulatory bodies in the world like UK’s FCA and FSA.

Secondly, you need a spread betting platform. Most Brokers have their own proprietary spread betting platform and will make it available to you. And last, but not least, make sure you only invest the money you can afford to lose.

Guaranteed Stop Loss Orders

Spread betting offers guaranteed stop loss orders, which can be important in today’s volatile and illiquid markets. In forex trading not only can you lose your entire account balance, you can even take losses that exceed your initial deposit. If this happens you end up in debt and owe your broker some money. If you’re concerned about asset safety, spread betting might be the right financial instrument for you.

Other markets

Finally, once you have mastered spread betting in forex markets, you can apply the approach to other asset classes. You can also spread bet on stocks and shares, stock indexes, commodities and even government bonds.

Conclusion

Spread betting can be a very reliable approach to Forex trading.  It’s a very flexible financial instrument that can be used the same way for both short-term trading as well as for long-term trading. However, recent studies have shown that day trading, which is a short-term type of trading, is the most used trading style when it comes to spread betting.

Ultimately spread betting is the simplest form of trading as you’re only concerned with the market direction, but at the same time, you can use spread betting as a complementary tool to your current forex trading operation that can be used to hedge some of the risk.

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