Today we are going to teach you about the very basics of spread betting using share prices as an example. We are going to break this down into several steps for you.
Step 1: Getting a quote. You ask for a bid-offer quote from a spread betting company. This can be done in several ways, online, telephone, etc.
Step 2: If you hold the belief that the value of that commodity (in this example Shares) is going to rise above the offer price which has been offered by the Spread betting company. In this situation you would buy.
If you hold the opposite belief to the one above, i.e namely that the commodity (in this example Shares) is going to fall below the bid price offered by the spread betting company, in this situation you would sell
Step 3: Pick your stake size, this is the amount you will risk per point movement of the commodity price. For example this can often be as low as 10p. If you place a 10p stake on a Buy – if the share price rises 10 points above the offer price offered by the spread betting company you would have made a £1 profit.
Step 4: Inform the spread betting company of the funds you wish to risk and place an reasonable stop-loss position in order to prevent large losses.
Warning: Spread betting risk substantial financial loss, all transactions are at your own risk. Only speculate on financial spread bets within the limits you can afford. Spread betting may not be a suitable investment for all. Make sure that you understand the risks involved and seek independent advice to whether spread betting is suitable for you.
Part of The Beginners Guide To Spread Betting