Spread Bet Techniques
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Spread Bet Techniques
Spread betting allows a trader to speculate whether an asset is going to rise or fall.
You can spread bet in any market, and your profit comes from correctly guessing the direction the market goes.
You do not need to bet on a specific price, just the direction.
Spread betting is similar to CFDs as you don’t own the actual stock. But brokers usually offer no commission on spread betting, while CFD fees are often high.
This type of trading is accessible to everyone interested in trading. It is often recommended to beginners as it is easy to grasp.
As with all trading and investing, some techniques work, and some do not work.
Below are four spread betting techniques that actually work:
This strategy is based on identifying areas where trends are going to change direction.
Here, you bet bullish or bearish , suggesting that the market will either increase or decrease.
When using this technique, traders open a spread bet in the opposite direction to the current trend.
For reversal spread betting to work, you need to take advantage of all tools and indicators. The most effective being the Fibonacci retracement tool , which helps determine if a market is reversing or if it is experiencing a retracement.
Prices going beyond the identified levels signify a reversal in the market.
The best confirmation tools for this technique are:
The NAS100 has been in an uptrend for the past week, and you believe it is about to experience a reversal.
You use the tools available to you and decide to place a bet if you see the double top candlestick pattern .
Should the market reverse, you will make a profit. However, if it continues on the same path, you will experience a significant loss.
The tools are merely indicators, and there is no guarantee to how the market will behave.
This technique uses technical analysis to find the trend. The trader then places a bet in line with this trend.
It is considered a medium-term strategy.
You use the tools available to you to find the start and finish of a market’s movement.
which help find the best open and close positions.
Trend market spread betting is a popular strategy. It allows you to follow the market regardless of whether you are going long or short.
However, you need to remain alert as trends can change in an instant. This technique also falls victim to overnight risk.
When using this technique, decide on a timeframe to watch a market before placing your bet.
The price of an alternative vegan sausage is on an uptrend. You open a long spread betting position by buying the sausages.
When you reach your profit target or the data suggests the market is about to reverse, you close your bid by selling the sausages and collecting the profit.
Alternatively, suppose the vegan sausages were in a downtrend. In that case, you could open a short spread by opening a position to sell.
This involves entering a trend as early as you can in anticipation of the price breaking out.
Breakout spread betting is based on the belief that key price points are an indicator of movement or an expansion of volatility.
Coming in at the right time allows you to take advantage of the trend from beginning to end.
For this technique, you will utilize:
These tools will help you identify resistance and support levels.
To facilitate this technique, use your limit-entry orders at identifying price points. If the market moves, the order is automatically placed.
It has been this way for over three weeks, but the data suggests it will soon break out into a downward trend.
Historic levels of support show that a key price point is $1,385.
You place an entry order to open a short spread if the price falls below $1,384.
If this happens, your order is automatically placed.
If not, then you haven’t lost or gained anything.
News-based spread betting involves trading based on news and market expectations.
As news travels fast these days, you need to have the skills to assess the information quickly after its release to determine if it is credible and of any use.
To be successful with news-based spread betting, you need to:
News-based techniques are useful for volatile markets like commodities .
Almost every day, there is a news update that affects the price of coal or oil. There are also events guaranteed to happen, such as elections that will change the market.
Use an economic calendar and keep up with worldwide events to help with this technique.
News-based spread betting only works if you are familiar with global political, social and economic events.
Votes for the presidential election are currently being counted, and two of the swing states voted differently than expected.
This news has speculated that the US dollar value will increase by 0.23 cents on the British pound.
From your knowledge of currencies during elections and the outcome from the last US election, you decide that the value will not change.
You decide not to take any drastic action. Instead, you place an order to open a short spread should the value increase by 0.20 cents.
Spread betting techniques and strategies exist because they are known to work. But not every technique is applicable.
To be successful in spread betting trading:
WikiJob does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal capital.
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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. High volatility increases the risk of sudden, large or rapid losses.
To prioritise the service we give our existing clients, IG is not currently allowing any new positions on GameStop and AMC Entertainment.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. High volatility increases the risk of sudden, large or rapid losses.
To prioritise the service we give our existing clients, IG is not currently allowing any new positions on GameStop and AMC Entertainment.
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Spread bet to speculate on rising and falling market prices. Learn how to spread bet in six steps – covering everything from opening an account to making your first trade.
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Spread betting is a way to speculate on the future direction of a market’s price. If you expect an asset’s price to rise, you’d open a position to ‘buy’ and if you expect an asset’s price to fall, you’d opt to ‘sell’.
When you spread bet, you’ll be putting up a certain amount of capital per point of movement in the underlying market. Your profit and loss would then be multiplied by this amount to get your final sum.
For example, you thought a stock was going to increase in price so you opened a spread bet for £10 per point. If the stock increases in price by 10 points, you’d have made £100 (10 x 10), but if it decreased by 5 points, you’d lose £50 (50 x 100).
Spread betting is also leveraged, which means you’ll only need to put down a small initial deposit to open a trade. Your end total is then calculated using your full exposure – meaning your profits and losses could be magnified.
Open a live account via our online form – you could be ready to trade in minutes, and there’s no obligation to add funds until you want to place a trade.
Alternatively, you can practise trading first in our risk-free demo account.
A trading plan outlines your motivation, time commitment, goals, attitude to risk, available capital, markets to trade and preferred strategies. Creating one is particularly important if you’re new to the markets as it can help you take the emotion out of your decision making. It will also provide some structure for when you open and close your positions.
Once you're logged in to our platform or app, you can choose from 17,000 markets, including:
Of course, with so many markets to choose from, it can be difficult to know where to start. That's why we offer a range of tools and resources to help you analyse markets and identify opportunities:
Get technical and fundamental analysis straight from our in-house team
Keep your finger on the pulse with unique price and economic data alerts
Get actionable ‘buy’ and ‘sell’ suggestions based on analysis
Discover price trends using popular indicators such as MACD and Bollinger bands
See a full schedule of macroeconomic events and company announcements
Narrow down your choice of share by fundamentals, location, index and industry sector
Access unique insights including the day's recent activity and client sentiment
Start spread betting on our award-winning suite of platforms, including:
These can all be tailored to suit your trading style and preferences, with personalised alerts, interactive charts and risk management tools.
Find out more about our trading platforms
When you open your platform, you’ll be able to search for a market in the top left corner or browse through each asset class.
After you’ve opened the deal ticket for your chosen market, you’ll need to choose whether to buy or sell the market – depending on whether you think the asset will rise or fall in price. You’ll also need to decide on your bet size, which will determine the margin you pay.
Finally, before you enter the market, it’s important to consider how you’ll manage your risk . Attaching stops or limits to your position will automatically close your trade once it hits a certain level – a stop-loss order can minimise your potential loss, while a limit-close order can help lock in any profits.
Once you’re ready, it’s time to open your trade. You can then monitor the profit or loss of your position in the ‘open positions’ section of the dealing platform.
When you decide it’s time to close your position, you just click ‘close’ to realise your profit or loss.
Whichever market you’re interested in, it’s important to understand how much capital you’re putting at risk. For spread betting, the calculation for this is:
Capital at risk = bet size x market price (in points)
When you spread bet, the market price will be displayed in points. For example, if you were trading a forex pair, instead of a price of ‘1.12980’ you would see a price of ‘11298.0’. So, a trade worth £10 per point of movement, would mean you’re putting a total of £112,980 at risk (11298.0 x 10).
As spread betting is a leveraged product, you will only need to cover the margin as opposed to the full value of the trade. The spread betting calculation for margin is:
Margin = margin factor x total exposure.
For the above example, if the margin factor was 3.33%, you would only have to put down £3762.23 (3.33% x £112,980) to open the trade. Leverage could potentially magnify your profit and loss, as they’re calculated using the full size of your trade – in this case, £112,980 – not just the margin.
You decide to spread bet on Barclays stock, which is currently trading at 150.25. If there was a one-point spread, you would be presented with a buy price of 150.75 and a sell price of 149.75.
You open a long spread bet position on Barclays, buying at £10 per point of movement at 150.75. If Barclays shares had a margin requirement of 20%, you’d need to deposit £301.50 (£10 x 150.75 x 20%).
Let’s say Barclays shares increased to 170.75, you might decide to close your position to take your profit.
You’d close the spread bet position at the new sell price of 170.25. As the market has moved in your favour by 19.5 points (170.25 - 150.75), your profit would be £195 (19.5 x £10). You won’t pay any tax on your profits. However, you would have to pay funding charges to keep your position open overnight.
However, let’s say shares of Barclays fell instead, down to 130.25, there would be a new sell price of 129.75. As the market has moved against you by 21 points (129.75 - 150.75), you’d be looking at a loss of £210 (210 x £10), plus any additional funding charges.
You decide to spread bet on forex on EUR/USD, which is trading at £1.19129. You think that the dollar is going to rise against the euro, so you decide to sell the currency pair.
As spread betting markets are listed in points, when you enter the platform you would see a market price of 11912.9. And, because of the spread, you would see a sell price of 11912.6 and a buy price of 11913.2.
You open the trade for £15 per point at 11912.6 and as EUR/USD has a margin factor of 3.33%, you’d need to deposit £5950.35 (£15 x 11912.6 x 3.33%).
Say EUR/USD fell to 11890.1, with a buy price of 11890.4 and a sell price of 11889.8. As the market has moved by 22.2 points (11912.6 - 11890.4), you’d have a total profit of £333 (£15 x 22.2). Remember, if you’d kept this position open overnight then your total profit would be lower because of funding charges.
However, let’s say EUR/USD rises instead. So, you’d close your position at the new buy price of 11936.0. As the price has moved against you by 23.4 points (11912.6 - 11936.0), you would have made a loss of £351 (£15 x 23.4), plus any funding charges.
You want to spread bet on the FTSE 100, which has an underlying market value of 7114. We’ll apply a one-point spread, so you can sell it at 7113.5 or buy at 7114.5.
As you anticipate that the FTSE 100 is going to rise, you opt to buy at £10 per point at 7114.5. The FTSE 100 has a margin factor of 5%, you’d only need to deposit £3557.30 (£10 x 7114.5 x 5%).
Let’s say your prediction is correct and the FTSE 100 increases in value. You close your position when the market reaches 7150 – at the new sell price of 7149.5.
As the market moved in you favour by 35 points (7149.5 – 7114.5), your profit would be calculated by multiplying this figure by the amount you’ve bet per point. This gives you a profit of £350 (£10 x 35) minus any funding costs.
However, let’s say the FTSE declined in price, instead of rallying. So, you decide to cut your losses when it hits 7078 – with a sell price of 7077.5.
The market has moved against you by 37 points (7077.5 - 7114.5), giving you a loss of £370 (£10 x 37), plus any overnight funding charges if the position was open for more than one day.
You decide to spread bet on gold, which is currently trading at 1315.70, with a buy price of 1316.00 and a sell price of 1315.40. As you believe the price of gold is due to decline, you open a spread bet to sell the commodity for £30 per point of movement.
Gold has a margin factor of 5%, so you would need to put down £1973.10 (£30 x 1315.40 x 5%) to open the position.
Let’s say the price of gold did fall, down to a new price of 1300.10. You close your position at the new buy price of 1300.40.
As the market has moved in your favour by 15 points (1315.40 - 1300.40), you would be taking a profit of £450 (15 x £30). If you had kept your position open overnight, you would also have funding charges to pay.
However, if you were incorrect and the market price of gold rose instead, to 1335.70, you would have made a loss. You’d close your position, at the new buy price of 1335.40.
As the market has moved against you by 20 points (1315.40 - 1335.40), your total loss for the commodity spread bet would be £600 (20 x £30), plus any funding charges.
If you’re a retail trader, you can spread bet on over 17,000 markets including forex, shares, indices and commodities. Professional traders are also able to spread bet on cryptocurrency markets, but trading crypto derivatives isn’t available to retail traders.
Spread betting is available to anyone who has sufficient knowledge and experience of trading. This will be assessed during the application process for an account with us.
Spread betting can be a useful tool for anyone who wants a range of asset classes, tax-free trading, and the opportunity to speculate on markets that are rising and falling in price. However, if you don’t feel ready to start trading live markets, you can start by building your knowledge with IG Academy’s range of online courses, or trading in a risk-free environment with an IG demo account .
The cost of spread betting depends on the bet size that you choose, how much capital you are willing to put up, and how long you keep your trade open for. Before you start to spread bet, it is important to establish what your parameters for trading are, and how much capital you can afford to risk.
Find out more about IG’s spread betting charges .
To open a new spread betting account with us, you just need to fill out a simple form so that we can establish your previous experience and available funds. This way we can ensure that you get the best trading experience possible.
Our mobile trading apps, state-of-the-art technology and free educational tools make the process of switching your account to us an effortless experience. So, you can be signed up and ready to trade within minutes.
Find out more about spread betting and test yourself with IG Academy’s range of online courses.
Discover the differences between spread betting and CFD trading
Learn about risk management tools including stops and limits
Browser-based desktop trading and native apps for all devices
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
The value of shares, ETFs and ETCs bought through a share dealing account, a stocks and shares ISA or a SIPP can fall as well as rise, which could mean getting back less than you originally put in. Past performance is no guarantee of future results.
CFD, share dealing and stocks and shares ISA accounts provided by IG Markets Ltd, spread betting provided by IG Index Ltd. IG is a trading name of IG Markets Ltd (a company registered in England and Wales under number 04008957) and IG Index Ltd (a company registered in England and Wales under number 01190902). Registered address at Cannon Bridge House, 25 Dowgate Hill, London EC4R 2YA. Both IG Markets Ltd (Register number 195355) and IG Index Ltd (Register number 114059) are authorised and regulated by the Financial Conduct Authority.
The information on this site is not directed at residents of the United States, Belgium or any particular country outside the UK and is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
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