Financial Spread Betting

Here are seven reasons why you should consider financial spread betting

1. Easy to pick up

Financial spread betting is based upon a simple concept of betting a stake per point. This system works for all of its related markets. It may seem tricky at first but after you have run through a few examples you will see how easy it is to pick up.

2. Low Starting capital requirement

You don’t have to be rich for financial spread betting. You can start of with a few hundred pounds in your account. Unlike share trading there is no commissions in financial spread betting so this means you aren’t penalised for smaller trades. The costs are included in the size of the spreads which are the same size no matter the size of your trade size.

3. Diverse Markets

You can trade in a number of different markets from one financial spread betting account. Markets include individual equities from home and abroad, indices trading, currencies, commodities, house prices, bonds and interest rates. The technical element of financial spread betting works in the same way over each of these markets, you put a stake per point.

4. Going short

It you only two positions are long or neutral then you could be leaving a lot of money on the table. Bear markets make people very rich and financial spread betting allows you to take full advantage of that. You can also use shorts as a way of hedging your other long positions.

5. No Tax To Pay

Currently, you don’t have to pay tax on any profits you make and you don’t have to pay stamp duty when you buy. If you are making profits then this is a massive benefit to you especially if you are making profits in excess of the capital gains threshold. Remember though that this may change in the future so check the tax laws on a regular basis.

6. Eliminates currency risks

When you buy securities in countries that use a different currency than your own then you are always have a double risk because of the currency exposure. With financial spread betting you make money on a point by point change and the currency that the security itself is trading in doesn’t make any difference. Obviously there are occasions when you do want the currency exposure and in those cases you can use financial spread betting to easily expose yourself to other currencies.

7. Power of Leverage

Now you should always be sure to understand the risks when it comes to leveraging your position. That is because you can lose more than your initial stake. But when used correctly, financial spread betting is a great way to benefit from leverage. Small margin requirements mean that your profits (and losses) are amplified.

There are many reasons why Financial Spread Betting is a great way to trade online. The first is that it is simple to learn. It may not look like it when you first start but once you get going it is really easy to understand the mechanics behind it.

You also don’t need a lot of money to get going with it. Because you trade on a margin you don’t need a substantial deposit in your financial spread betting account. This does make it risky which I will come onto later.

There are many different markets that you can trade in and better still you can trade them all from the same account. This means that you can quickly and easily switch from gold to shares in BP for example. The principles of financial spread betting work the same way in all the markets so switch between them is simple.

You can use financial spread betting to go short on any particular market or asset. This is a great way of making money in a bear market when everyone is panicking but it is also great for hedging your other long investments. Say if you are long on a particular asset but didn’t want to sell for tax reasons but you felt quite bearish about it, you could go short on it and cover yourself.

And if you made a profit, well there is no tax to pay. There is no tax to pay on profits and there is no stamp duty to pay. This is the great advantage of financial spread betting as it means that your profits will be that much bigger.

You also don’t have to pay commission to the financial spread betting company. They make their money through the size of the spreads on a particular trade. So if you are looking for value for money look out for a tighter spread.

Financial spread betting is risky because it uses leverage. If you do use it right then it is a great advantage. Use it incorrectly and you could end up in serious trouble. You can lose more than your initial deposit so make sure that you fully understand the risks before you start.