What is spread betting?

Spread betting is a form of betting which provides you with the chance to play a wide range of markets and offers the possibility of making sizeable profits. But it’s not something that you should just blithely wander into without doing your research and ensuring you have a decent bankroll to start with.

The spread betting markets that you can play will primarily fall into categories – financial and sport. Both of these markets will generally operate in the same way, it is usually just what you are betting on which will be different.

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CC by AndreasPoike 

Starting with the basics of spread betting, before looking at the different markets, you are essentially taking a view on whether something is going to rise or fall, or be higher or lower than a specified amount. The spread itself falls between two amounts set by the company you are spread betting with.

You must then decide whether the outcome is going to be lower than the smaller amount or higher than the larger amount on the spread. If you think it’s going to be lower, then you will be selling. If you think it’s going to be higher, then you will be buying.

What you must then do is work out how much you want your stake to be. Your stake will correspond to a one point rise or fall. So, if you place $1 as your stake, and you have taken a buy position on the number of corners in the Champions League final between Barcelona and Juventus, for example, and the figure rises by 10, then you will receive $10 profit. If it goes 10 points the other way against you, then you will lose $10.

 

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CC by Leandro.C 

This is perhaps one of the most important things to remember about spread betting – making sure you can cover your losses. Obviously, when you first place your spread bet, you don’t know with any certainty which way a market is going to go, so you don’t know how much you will win or lose.

You must be comfortable with the amount you’re prepared to lose as a volatile change in the market could see you quickly incur huge losses. One way to prevent this is by using stop or limit triggers. This allows you to specify an amount you are prepared to lose and, once this figure has been reached, a trigger will stop your bet there and then. Similarly, you can set an amount you want to make as a profit and the trigger will ensure the bet is closed once that figure is reached.

To further your spread betting education, there are lots of websites which can provide details on how to place spread bets with advice on how you should approach it.

By the time you’ve settled on your stake and how much money you either want to make or are prepared to lose, you’ve probably also decided what market to play.

If you go for the financial markets, then you must remember that you’re not actually buying or selling shares in the companies you are trading. You are simply trading on their price and as to whether it is going to go up or down.

You can trade on the price movements of certain equities, on indices such as the US30 and the UK100, commodities like coffee, metals like gold and also the currency markets.

If you are looking at the sports markets, then you can usually bet on most of the major sports, such as soccer, horse racing, golf and tennis.

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CC by nakashi 
Within these sports there are a range of different markets, such as how many goals will be scored in a soccer match, what the combined winning distances will be from a race meet or how many games will be played in a tennis match. So you can find a market on American Pharoah in the Belmont Stakes, for example.

Over time you will work out which market suits you best, especially as you build up experience, knowledge and your own trading strategy. Spread betting is a form of betting which requires time to be spent on research and creating a plan, but once you’ve put in the groundwork, there are rewards to be discovered.

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I'm an eternal optimist, follow a Buddhist philosophy, geek of many areas, entrepreneur, learning the Chinese language, a die-hard sports fan, love politics and nuclear submarines.

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