Spread betting or more appropriately referred to as FSB or financial spread betting is a form of betting in the financial markets that allow you to enjoy huge profits within a shorter period of time. You can take into account any financial product or instrument you want to use for betting. At the end of the day, you can either earn huge profits or you can lose all your money. For this reason, it is regarded as one of the riskier forms of trade in the financial markets.
The fact that you are able to bet on a number of financial instruments makes this form of trading or spread betting much sought after and popular.
Why FSB is considered risky?
Just as financial spread betting offers huge profits, it is also risky at the same time. This is because the trade outcome is based entirely on speculation. You either gain a lot or you lose a lot. So, there are ways by which you can not only safeguard your investment but also safeguard the interests of the trading house or the broker too.
How to minimize risks in FSB?
There are several ways in which you can minimize the risks, one of the most prominent ways being making use of stop losses. This provision allows a trader to order closure of trade at a level that is specified by the trader beforehand. The fact that there might be several stop loss orders at any given point of time, traders might face problem of what is commonly known as “gapping”. This can further be controlled or influenced by guaranteed stop. This is a process in which the trading house or the broker you hire the services of is able to “pull you out” of the trade as per the predetermined order irrespective of the status of stop loss orders of other traders.
For this reason, it is often said that a reliable broker can be of immense help. In this context, it may be mentioned here that ETX Capital has come a long way and earned the faith and trust of the traders.
In order to protect their investment, the trading house will ask for some kind of protection. And this eventually gives rise to the concept of ‘margin’. Margin is nothing but a kind of deposit, which is different for different trading houses/brokers. Ideally, and as per demands of most of the brokers, the ‘margin’ value has been limited to 10% of the bet value.
How do brokers help in spread betting?
As mentioned above, trading houses will offer 2 quotes, one that is known as the bid price and the other one is known as the ask price. The profit will depend on the difference between the price quoted by the broker and the price at which the bet closes at the end of the day.
One of the main advantages of spread betting is that you get guidance not just in terms of trading strategies but also in form of online assistance, live chat, tutorials, and so on.
Benefits of spread betting
When it comes to benefits, you not just earn profits but you are not required to pay taxes as per UK Laws.