Spread Betting – What Are the Benefits and Best Practices?

If you are considering looking at investment this year, and want to make your money work for you by following the financial markets, then there are lots of options open to you. Some, like trading CFDs, forex and commodities, can actually be more profitable in times like we are experiencing at the moment when there are major political and economic events like Brexit, and the Trump presidency, as these tend to lead to the kind of volatility that traders can do well out of (or badly out of, too – but things are definitely interesting).

Others, like investing in stocks, or generally taking long term investment positions, can be less safe in ‘interesting times’. What can be better, for a lot of people, is choosing something like spread betting, that allows you to use your predictions of what will occur in a market without actually investing in it in the traditional way.

Why Is Spread Betting Advantageous Right Now?

Spread betting allows you to profit even when markets are doing badly, just by predicting that that is what will happen. You do need to keep up on current events, but you can choose positions that last only as long as you want to stay involved. If you think a big announcement that is going to happen next week will have an effect on a market, you can bet on that, without having to remain tapped in to financial news related to that market permanently as you would if you were buying stocks or trading a forex pair. Additionally, you can carry out all your spread bets using your own regular currency and without paying high commissions or taxes on any profits you make.  It is, from a tax point of view in the UK, considered the same as gambling winnings.

Best Practices if You Want to Start Spread Betting

Spread betting is pretty easy to get started with. You just need to set up an account on an online trading platform, and have some capital you are OK with risking for a potential profit. You can stake as little as you want to begin with, which is another reason why spread betting is a good choice for beginner investors.

Planning and Strategy

However, while it is easy to start, you do need to have some best practices in mind to make sure you are not putting yourself at unnecessary financial risk. Spread betting can be approached like any other kind of gambling or ‘playing the markets’ – you need a plan and a strategy that include what your entry and exit criteria are for any given position, and how much capital you are willing to stake on something. With any investment you are advised to trade based on analysis and intellect rather than emotion, so it is also prudent to base your decisions on your research and knowledge rather than on things like anxiety about trying to recoup a loss you may have made. Good spread betters have a plan, stick to it, and stay up to date on current affairs that affect the markets they bet on. Have a strategy to do that, and the world is effectively your oyster!

The internet too makes it easier than ever to be a good spread better, so use it. Choose a good online trading platform, find news sources that give you what you need, and also try joining communities with other spread betters where you can discuss bets and approaches and their pros and cons. Nothing is ever black and white in economics, and getting some other people’s ideas can often help you make good choices.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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