Spread betting is something you’ve probably heard of before. You might even be very familiar with it if you bet on sports, where spread betting is common. What you might not know is that many investors from around the world make a lot of money through spread betting on financial markets. There is actually very little difference between betting on the goals scored in a football match, and the price fluctuations of a financial instrument.
For those that aren’t clear, spread betting is when you bet on the amount by which your prediction is correct, rather than just betting on a particular outcome. So you might win more money the more points in a sports game for instance. It’s very similar in finance; you wager a certain amount and then you earn more, the more the markets move in your favour. If the market moves against you, then you lose money. Unlike many other financial products, you can bet on prices going both up and down, so there’s a lot of opportunity.
There are some differences between sports spread betting and financial spread betting. The main one is that brokers impose a ‘spread’, which is a certain amount placed on top of the price of the instrument. Until the price goes past this point, you cannot make a profit. For this reason, brokers that offer smaller and ‘tighter’ spreads are more popular. The spread can have a significant impact on the end profit, so it’s always worth making sure that you’re getting the best deal.
Another difference is the use of what is called leverage or trading on a margin. This means that when you place a bet, you deposit a certain amount, and then this is scaled up when it comes to actually making a profit, or indeed a loss. It is this that can make spread betting so lucrative, but it also means that you must be very careful when opening a position, as if things move too far against you, there is always the chance that you will lose more than you deposited initially.
There are a lot of different instruments that spread betting covers. There are traditional investments, such as stocks and indices, but also the foreign exchange market, which is becoming increasingly popular. The best brokers will offer a huge range of things that you can spread bet on, and all the tools to help you decide what to wager your investment on. CMC spread betting platforms are some of the best available, with a wealth of useful features. They have also recently brought out mobile apps, so you can actually spread bet while you’re out and about.
Now that you know financial spread betting isn’t as complicated as you might have thought, you can find all you need to know through an online broker. Not only do CMC offer excellent platforms, but they offer a demo account, so you can try your hand at spread betting before wagering any money. It could be a great place to start.