Learn spread betting the easy way
Below is a basic guide to learn spread betting, you need to go into much more depth than this, but we give you the basics to understand the concept. Like anything your knoewledge will come with practice using a companies systems, so we suggest that you open a free spread betting account and start trading on a demo system.
Spread betting companies in the UK have prices on many of the world leading shares, industries, indices, commodities, currencies and sports.
5 steps on how to spread bet
1. Stop and limit orders
With spread betting there are two main types of order, stops and limits.
Definition: A stop is an instruction to deal at a lower level than the current price.
Definition: A limit is an instruction to deal at a higher level than the current price.
Example:
If the FTSE250 is trading at 9600 and you leave an oder to sell at 9550, the order is a stop as selling at 9550 is a worse price than selling at 9600. Reversely if you leave an instruction to sell at 9650, it is a limit order as 9650 is a better level to sell at than 9600.
2. Margins and leverage
Spread betting allows you to put a small portion of the underlying value of the share rather than buying the share outright (traditional share dealing). In effect this means that you have levearge to trade more positions for the same amount of money it would cost you to buy the shares outright. Gearing your spread means that you are able to control for a small cost a much more expensive asset. It is possible to rack up large losses compared to your deposited balance and as such you may be asked to send more money into your account, so that your risk is offset by enough money in your account to cover it. If you are asked for this then you may want to consider your trade and change it to control your level of risk.
3. Risk Assessment
What are you comfortable with? If you think that cash and bonds are risky then spread betting is not for you. Speculation is indeed a risky business and you have to be prepared to take risks for potential rewards. Geared products are at the top of the investment risk tree so make sure your the kind of peerson that can deal with this kind of pressure/excitement. Many of the spread betting companies have account available that have limited risk and are designed with the risk adverse trader in mind. These could be a good way to learn spread betting and work up to a higher risk account, when you are comfortable.
4. Financial Markets
Spread betting is versatile, offering the ability to trade in so many different types of things. It can be applied to mist financial markets and you can speculate on so many different types of financial product all over the globe. However it is so easy because it is all in one place via a web application, so you can trade currencies, gold and FTSE100 all in one place and from home.
Here are just a few types of things that you can trade on:
- All major shares in UK, US, European and Asian markets
- All major stock market indices including FTSE100 and 250, Dow Jones, NASDAQ and Nikkei 225
- Stock market sectors including Property, banking, and Oil/Gas
- Commodities like gold, copper, coffee and wheat
- Fixed income securities like US treasuries and UK gilts
- Forex including US dollar, Sterling, Euro and Yen
5. Be disciplined
Undoubtably you will find a strategy or system that works for you and you may already have financial product knowledge which may lead you to only looking at the dollar sterling rate. This is a good thing because you can’t know everything about each product, so its better to specialise and really know it well than try and speculate on lots of products. Don’t trade every day, choose you time well and back it up with sound knowledge. Keep trades small until you are comfortable with your system then slowly open it up.
If you follow the 5 steps above you will learn spread betting very quickly, but without taking a huge amount of risk.