The popularity of financial spread betting is growing rapidly. Before you invest your hard earned money, you need to understand some basics of share trading.

What is spread betting?

Spread betting is a kind of trading where bettors bet on a spread on an unknown outcome. The spread betting company quotes two prices, and a bet is made on whether the outcome will be above or below this spread. The profit or loss depends on the extent of deviation from the spreads. Sports’ spread betting is a popular variation, where traders can bet before a game for a certain outcome. For example in soccer game the spread betting company fixes the spread for 10-12 corners for a match. A bettor approaches the firm and buys at £25 per goal above 12. If the total of corners in the match is 16 they make a profit Profit = (16 – 12) x £25 per corner = 4 corners x £25 per corner = £100 profit However, had there been some good defending there may only have been 9 corners in the game in which case the user would lose. Loss = (12 – 9) x £25 per corner = 3 corners x £25 per corner = £75 loss.

The bettor has won (4 x £25). And if the total corners are 9, the bettor loses (4 x £25). In a “Sell” transaction, where you bet on the market to go down, everything is similar except the bet is made against the bottom value of the spread, in this case betting on less than 10 corners. You can spread betting on many types of financial market; commodity spread betting, and forex spread bettingbeing a few of them.

Financial Spread betting

In financial spread trading, bets are made on the movement of price of financial instruments like stock indices, commodity prices etc. Investors may spread bet on commodities, forex and stock market indices. Financial spread betting offers many advantages over traditional share trading. Unlike stock market trading, with financial spread betting you can make a profit even when the stock prices are falling. You need not pay any commission, irrespective of how often you trade. With financial spread trading you can also tax advantage of the tax benefits. Sprea

d betting offers more variations of investment than share dealing. Other than shares you can trade in indices, currencies and commodities, thereby giving you many more options for trading and potential returns.

The risks involved in financial spread trading can be higher. You can lose more money than you initially invest. Bettors who spread bet on shares need to understand the market. Traders of financial spread betting can usually minimize risks by limiting losses using various tools and automatic trading orders known as ‘Stop Losses’.

Power of Knowledge

When it comes to financial spread trading, the more you know how it works, the more you can gain from it. Which is where, Clean Financial comes to your aid. Find news, views, articles, analysis and anything else you may be looking for about financial spread trading. If you are a beginner you can benefit from the proven spread trading strategies. Once you have knowledge on your side, financial spread trading will take on a new dimension. It will be more than just gambling, it can be but planned and calculated moves based on many market factors in order to maximise profits potential.

About the Author : Adam Jepsen