Speculate on the Financial Markets

September 13, 2011 |

Spread Betting

Speculate on the Financial Markets with Spread Betting

Not many people like to speculate on the financial markets unless they really know what they are doing. Many have lost money while there are a few with success stories. Dabbling in financial markets is not as easy as it is made out to be, especially if you have no prior experience. Spread betting is a different way to speculate on the financial markets and it is a much simpler process than what you would use to trade in options and futures.  Spread betting means betting on the market fluctuations of the shares or stocks.  Read everything about spread betting at spreads.org.uk. Unlike in ordinary trading where you would make a profit only if the share prices rise, spread betting allows you to make a profit on the rising or falling of the prices, provided you make the correct prediction of the movement.


Even though you might use spread betting, which is a simpler process, to speculate on the financial markets, it has its disadvantages. The markets are quite volatile and changes take place rapidly leading to substantial losses which may be more than your initial capital. Therefore, spread betting may result in potential magnified losses which the trader may not have imagined possible. Speculators indulging in spread betting must therefore only wager money that they can afford to lose.


When you speculate on the financial markets, you must be able to manage your risks. To do that you must understand the financial market completely. It means you must have all the latest financial information readily available. Political instability is a major factor in deciding the volatility of the markets. The financial markets react to many other issues as well, leading to the fluctuations in the value of the stocks and indices. Getting a read on these issues will help you understand how the markets will react to certain stimuli and accordingly place your bets.


While it is important to be able to read the financial markets, you might want to have a few tools at hand to help you. You can predict the movement of the indices with the help of financial charts as well as historical information on the performance of the particular indices or stock over time.  All this data will help you analyze how stable the prices are and assist you in following the direction of the stock indices. Follow the latest financial news at www.spreads.org.uk.


Theoretically, spread betting is one way to speculate on the financial markets wherein you can make better profits. The profits you make from spread betting are not taxable, that is, you do not pay any capital gains tax. Tax is an expense for the speculator and any scheme that avoids taxes is always welcome since it leaves his profits intact. Spread betting involves less paperwork as you are not required to arrange for tax-related records that are an indispensible part of traditional stock trading and shareholding.


When you speculate on the financial markets by purchasing stocks, it involves payment of stamp duty to the government. In case of spread betting, you do not actually purchase the stocks, so you do not have to pay stamp duty. Not having to pay stamp duty obviously increases your profits.


Traditional share trading involves paying commission to the broker. When you speculate on the financial markets with the help of spread betting, the spread betting company does not charge a direct fee or commission, but all the expenses related to the bet are included in the bid-offer spread.


When you speculate on the financial markets, generally a huge investment of capital is the norm. With spread betting, however, you can begin trading with ₤100 in your account and bet as little as 1p on the price movement of indices, shares, commodities and currencies. There is no need for a huge capital outlay. Depending on the financial experience, many spread betting companies offer a credit account to their members which helps do away with the need to tie up a huge capital.


Perhaps the biggest advantage of spread betting is the ability to choose a “stop loss” level to control your risk and limit potential losses. If the betting company’s quotation reaches that level, your bet is automatically closed and you are protected from potential losses. At http://www.spreads.org.uk, you will find information on how to speculate on the financial markets.

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