Spread
betting systems help investors make money by provided a structured method
of placing bets on share prices. When an investor places a spread bet in
the financial market, they do not actually buy shares in companies. Instead
they are trading in derivatives that are linked with the changes in price
of a product or market. The investor can bet on the shares going up or down
in points and they win or lose by the quantity of point change multiplied
by the amount bet on each point. Thus, if you were to bet £2 per point on
a company rising in value, and that company rose by 10 points, you would
make £20. In the United Kingdom, gains made from spread betting are exempt
from capital gain taxes and stamp duty (depending on individual circumstances).
Software solutions
Many investors use spread betting systems in electronic software form. These solutions often allow you to trade online and they provide a variety of tools that let you check share prices and analyse various data that could influence the direction of the market. Some popular software brands include Capital Spreads, Cmcmarkets, City index, Finspreads, Igindex, Saxo Spreads and Sporting Index. These electronic solutions usually include a user’s guide and tutorials that provide training and advice on how to place spread bets in the financial markets.
How it works
There are two types of spread bets that one can purchase – a long trade and a short trade. A long spread bet means that you believe that the share price will go up in value. A short spread bet is placed when you decide that the share price will decline in value. There is a normal minimum bet of £1 per point, and you must place an overall bet based on the margin requirement of the share you are wagering on. Depending on the direction in which the price moves, you could lose more than the amount taken from your account and placed on the bet. When you decide it is time to take a profit or to cut your losses, you close your position. Electronic trading systems like CmcMarkets provide investors with tight spread options that give an opportunity for faster gains (and losses). Such systems will also provide competitive margin rates so that you save money in placing bets.
Knowing how to bet
There are many factors that influence the direction of any share price. If you are betting on a currency pair, for example, you must take into consideration things like supply and demand, technical trends, and the political and economic situation in both countries. A good system will allow you to analyse all these elements in a timely fashion.