How To Make Money Financial Spread Betting

How To Make Money Financial Spread Betting

Shobhit Seth is a freelance writer and an expert on commodities, stocks, alternative investments, cryptocurrency, as well as market and company news. In addition to being a derivatives trader and consultant, Shobhit has over 17 years of experience as a product manager and is the owner of FuturesOptionsETC.com. He received his master's degree in financial management from the Netherlands and his Bachelor of Technology degree from India.

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Spread betting refers to speculating on the direction of a financial market without actually owning the underlying security.

Guerrilla trading is a short-term trading technique that aims to generate small, quick profits while taking on very little risk per trade.

Investing is allocating resources, usually money, with the expectation of earning an income or profit. Learn how to get started investing with our guide.

An outright option is an option that is bought or sold individually and is not part of a multi-leg options trade.

In sports betting, a parlay bet is a bet made up of two or more individual wagers. Combining bets makes them harder to win but increases their payout.

The HSX or Hollywood Stock Exchange is an online prediction market where people place virtual bets on the performance of the entertainment industry.

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Spread betting can yield high profits if the bets are placed correctly. Most spread betting traders are successful only after creating a systematic trading plan following years of experience. Only a small percentage succeed and the majority fail. We look at the important factors for success and profitability for spread betting.

NOTE: Although popular in Europe and particularly in the United Kingdom, spread betting is illegal in the United States. The Commodity Futures Trading Commission prohibits the sale of foreign security futures products to retail investors based in the U.S. 1

Assume a stock is trading at 300 pence. But due to its illiquid nature, the bid-ask spread is wide at 290–310 pence. Because of the wide spread, a buyer who pays 310 pence for their position doesn't make a profit even if the stock jumps 3.33% to 310 pence.

Now take a similarly priced but highly liquid stock. Its spread is tighter at 298–302 pence. A buyer who pays 302 pence for the position will profit after a smaller move. Betting on instruments with tight spreads improves the potential for profits significantly.

How much total trading capital is available? How much money will be used per spread bet? How frequently will spread bets be placed? Answers to such questions help create an efficient trading plan.

Having £50,000 and blowing £25,000 on a first bet will leave you at a significant loss. With the remaining £25,000, you need to gain 100% profit just to recover your lost money. The profitability of spread betting can be improved substantially when one enters with a clearly defined spread betting plan, which is based on total capital, bet amount per sequential bet, and frequency of placing the bets.

Structuring bets properly can allow one to be profitable in the long run, even if your losing trades outnumber your winning trades. Consider Ami, who on average wins 4 of every 5 bets, while Ben only wins 1 of every 5 bets. Whose trades are more profitable?

On the surface, the answer would seem to be Ami, but it depends on bet sizing and the risk-reward scenario.

The key is placing bets in the right size given the risk versus potential reward. Losing multiple small bets for the chance of a single big win can pay off if trades are structured properly.

A UK-based spread betting firm like CityIndex offers spread betting across 45 global markets, with asset classes including stocks, indices, forex, commodities, metals, bonds, options, interest rates, and sectors.

Most novices tend to simultaneously play around in multiple markets and securities without a clear understanding. One should build expertise in a few asset classes. Attempting to generalize will lead to mounting losses.

Most spread betting firms offer a free practice demo account. Learn the tricks of the trade, backtest the structured betting plan, and practice it multiple times before jumping in with real money. Markets will remain forever, but real money lost during an initial phase of ignorant and inexperienced attempts will be difficult to recover.

Once comfortable with virtual returns, enter with real money. Start small and then expand as the betting profits increase.

Spread betting is available on leverage , which magnifies profit (and loss) exposure despite limited capital. With £100, a 10% leverage margin can allow one to make bets for up to £1,000. Leverage is a double-edged sword. It magnifies profits when a bet works favorably, but also the losses if it goes wrong.

Successful spread bettors use leverage efficiently with tight controls, while novices get tempted to take large positions and end up blowing their accounts. Controlling the leverage usage, based on a realistic availability of the capital amount, is necessary for success in spread betting.

While devising a trading plan, or while comparing performance from different trading activities, it is important to factor in the tax benefits available in spread betting. This is a very significant factor in making genuine profits.

Spread betting, though illegal in the U.S., is very popular in the U.K. and European countries. It offers potential for high profits, but most traders when they start due to inexperience. Building sufficient knowledge, selecting the right instruments, and practicing and backtesting a trading system can assist in generating profits from spread betting.

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Spread betting is a type of financial derivative product, where the trader can perform speculation on the price of the assets, whether it will rise or decline without any need of being an owner of the assets.
When there is trading in the stock market, the broker proposes two prices for the traders willing to do spread bets. The one among them is the price at which the trader can buy or bid price and the second one is the price at which the trader can sell or ask price and the discrepancy between these two prices is known as the spread. In such types of derivatives, there is no need to pay a broker with fees or commission as the broker makes his profit from the spread between the two prices. The trader will go with these prices according to the market circumstances as if the market grows then the trader will go with a bid price and if the market declines then the trader will go with the ask price.
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The following are the main features of spread betting:
Like any other type of trading, spread betting also requires a broad level of research as well as the knowledge of the market because only then investors can predict whether the market will rise or decline. There are three components of the spread betting working procedure. ‘the spread’ is one of them which is the charge the trader pay to open a position, the second of them is ‘the bet size’ which is the sum of capital the trader put in it and the last component of it is ‘the bet duration’ which shows how long the position will remain open before it expires.
Let us assume XYZ Ltd Company is presently having a buy price of $ 195.19 and the corresponding ask price is $195.04. Suppose a trader P has expected that the price of shares of this company will increase soon. So,P decides to buy more shares for $10 per step of the shift in $195.19.
Both these amounts, either profit or losses will be exclusive of additional charges.
A trader with a high level of research and broad knowledge about the market has the opportunity to make money with spread betting. If the trader’s predictions on the price of the assets are correct then the trader will get a profit on it depending upon the spread; spread refers to the variation in between the bid price and the selling price. If there is an increase in this difference, the trader will get higher profit whereas there is a risk involved in it too, like if the difference in the spread is declining or the bid price is lower than the selling price then the trader would suffer a loss on the bid. It is a kind of speculation process.
There is leverage in the spread betting which is a wonderful component as it enables the trader to attain a great level of profit with their capital which could be less if there is no leverage. Leveraged trading can also be called marginal trading. The leverage is very effective in getting a high level of profit with less capital; it not only magnifies the profit but also magnifies the loss if there is any. So the trader must use leveraged trading carefully.
Following are the advantages are given below:
Following are the disadvantages are given below:
To organize an active market for both aspects of the competition, spread betting was initiated. It is a type of wagering by which merchandisers could attain acknowledgment of different kinds of markets just by depositing a minimal percentage of the general amount of trade. Traders can gain proceeds if the market runs as per the expectation. Traders need not expense any kind of additional charges like a commission for trading, capital gain, or stamp duties.
This is a guide to Spread Betting. Here we also discuss the definition and how to conduct spread betting? along with advantages and disadvantages. You may also have a look at the following articles to learn more –
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Can you make money from financial spread betting?

Trading / By
Richard Berry

/ 18th May 2022 1st September 2022
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.
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It is possible to profit and make money spread betting on the financial markets, if you buy low and sell high, or sell high and buy low. But as with any form of short-term leveraged speculating on the financial markets it may be harder than you think.
If you look in our comparison tables of spread betting platforms you can see that less than 30% of retail traders make money spread betting.
I have worked in the spread betting industry for more than 20 years as a broker, research provider and reviewed and there are some common themes that are consistent in profitable spread betting traders. In those two decades I’ve dealt with all sorts of clients from absolute beginers to large institutional hedge funds and from that here are some tips on how you can increase your chances of making money from financial spread betting.
The simple answer to this is yes. Spread betting provides access to an unprecedented range of markets. The simple fact of the matter is that markets do one of two things. They either go up or go down. It is the rate at which they do so and whether you pick the right direction that determines if you make money.
Spread betting is not like placing a normal bet where your losses are capped at the initial stake. You are betting a certain amount per point move of an asset.
If the asset is priced at 100, it means that if it goes to 0 and you have bet £1 per point, you can lose £100. So for a £1 bet, your potential downside is 100x your stake.
On the plus side, if the price goes to 500, you make £400, which is a monster return for a £1 bet. You can read our article on how spread betting works here .
Making money from spread betting isn’t something that just happens, you will need to plan and to stick to a strategy to stand the best chance of making money from spread betting. Many spread betting and CFD traders lose money .
You will also need to budget carefully and do your research before you begin.
One of the most important factors in spread betting is choosing a broker you are comfortable and happy with. A good broker can offer much more than just the ability to make trades but also advice, educational tools, strategies and market insights.
There are many factors involved in choosing the right broker, including; liquidity, financial stability, range of markets, spread width, and educational and research tools. Read our guide on how to choose the right spread betting broker before you open an account.
There are some key principles that all spread betting traders should adhere to if they want to make money.
If not, you may find that paying a bit more attention to your strategy, discipline and objectives will make a big difference.
A strategy is key to spread betting. Having a clear idea of how you want to trade will give you the best chance of maximising profits and reducing losses.
If you are just getting started in spread betting and looking for a basic strategy that promotes good trading, we’ve put together a quick summary of three simple strategies that should help you find your feet.
It’s tempting to smash straight into the market and trade as large as possible. But this is the quickest way to lose your money. When you get started, bet small amounts relative to your account size. This means that if you have £1,000 in your account, allocate no more than 10% of that to the margin of each trade and keep at least 50% free for variation margin (covering your profit and loss).
The principle is the same if you are trading with £100k. You shouldn’t use more than 50% or £50k as an initial margin or have a single position that accounts for more than 10% of your account. Spread betting brokers provide access to well over 3,000 instruments to trade and having a diverse range of positions will spread your risk.
If you have two large positions and one moves against you, it can quickly wipe out your account. Having lots of small positions will help you manage your profit and loss more effectively.
The most important part of any spread betting strategy to remember for beginners is to always cut a losing trade and run profitable ones for longer.
The best traders in the world only get it right about half the time, but what makes them good traders is that they are not in a rush to take profits, and realise when they have called the market right to let a position run and bank big wins. If you call a trend or reversal well, there is more to be gained from adding a trailing stop and profit limit than taking a quick turn and looking for another opportunity.
Equally important is cutting losses. Like profitable trades left to run, possibly equating to big profits, losing trades kept open with the hope of recovery can lead to large losses.
If a position or trade is not doing what you ho
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How To Make Money Financial Spread Betting

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