When someone mentions the word betting, most people will immediately think about gambling, and while professional gamblers do exist, it’s not generally regarded as a good way to make money. In fact, gambling is a good way to lose money. Spread betting however, is a form of financial investment, and while it does involve wagering money, it is becoming increasingly popular as a way for people to make money, both part- and full-time. While a lot of the financial world seems inaccessible to most of us, it’s actually not the case, and spread betting is a very good example of this.
All investment products are centred around speculation on the increases and decreases in the value of financial instruments. This covers a broad range of things, such as currency, commodities and stocks and shares. They all fluctuate in value, and it is an investor’s job to predict what will happen, and profit from it. There are a lot of things that traders can use in order to speculate on what will happen. For instance, if the trader is interested in the forex (foreign exchange) market, and they learn that US employment is on the rise, they may enter the market in an attempt to profit from a rise in the value of the US dollar.
Many traders will actually buy or sell currency and shares, profiting when the value changes, but others will never actually deal with the currency itself. Spread betting follows this in that, while it is subject to all of the fluctuations of a market, you never actually need to buy the currency or share that you’re trading on. Instead, you wager money on the amount that a value will increase or decrease by. You place a deposit, and then for every point the market moves in the direction you predicted, you earn a profit. If prices move against you, then you will lose money, which is why it is always important to properly research the market before you take out a position. One of the great things about not owning any assets is that in most cases you won’t pay tax.
Unlike betting, when you become involved in the market, your deposit is scaled up. This means that you will be trading as if you’d placed a bet up to 100 times larger than what you actually had to pay up front. This means that you’ll make much larger profits, but it does also mean that your losses could exceed what you initially deposit.
Spread betting is easily accessed through an online broker, and there is plenty of free information available online, so if this sounds like something you’d like to try out, it’s easy to get started. It’s always a good idea to compare spread betting providers before you open an account, to make sure that you’re going to get the best service and tools. The best brokers will even allow you to open a demo account so that you can see what spread betting is like before you wager any money.