Business & Finance Investing & Financial Markets

Different Types of Spread Betting

Spread betting comes in many different forms as it is a more flexible method of making money when compared to traditional stock trading. You can spread bet on the financial markets such as FTSE, Dow Jones etc; but you can also spread bet on the price of commodities such as gold and oil or the value of forigen currencies.

Financial spread bettingĀ consists of betting on the fiancial markets. You pick either an index or a particular share and bet a fixed amount per point of change. You either bet the price (in pence) of the share will increase or decrease, if you bet on an increase at 2 per point you get 2 for every point increase; if you're wrong this is how much you lose. You may set stop losses using some systems, meaning that if you lose a certain amount of money the bet will stop. This helps you prevent any huge loss from a bad bet. Spread betting on share is the main form of spread betting in the UK market, it is provided by many sites such as SpreadEx and City Index.

Commodities spread betting is spread betting on commodities such as oil or gold. This is a popular alternative to actually trading in these commodities as traditionally you would have to actually purchase the commodity. Which causes problems if you ever needed to sell them. It is possible that there is no market and you would be stuck with it. In spread betting you can always stop the bet without a problem. This is also provided by many of the sites that offer financial spread betting. This can be a slower moving market which may suit some peoples style of investment, it has been very popular as the price of gold has been sky rocketing.

Forex trading is foriegn exchange trading and attempts to make money from the difference in price as exchange rates change. The general idea is that if I purchase 100 USD for at a time when 1USD is worth 0.7GBP, then next week 1USD is worth 0.9GBP I can exchange this for GBP and make a profit. This can be done on some financial spread betting sites however there are also specific sites which can be used for forex trading which may have more features.

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