Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how 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.
Spread Betting Explained: How To Spread Bet In The Financial Markets
BY TIO Staff|April 19, 2022
In this short video, you will learn about the benefits of spread betting, how it works and how you can get started with it. So stick around to the end and you will be up to speed in no time.
Let’s get started;
What is spread betting?
Spread betting is a type of trading that allows you to speculate on the price movements in the financial markets. When you place a spread bet, you decide on an asset to trade and choose a direction (up or down). Then you simply bet an amount of money per point and open a position, as either a buy or sell. Your profit or loss will be calculated by multiplying the bet size by the number of points gained or lost in the price of the underlying asset.
Spread betting is a simple way to trade the financial markets and provides a range of other benefits too.
The benefits of spread betting
The first one is, you can speculate on rising or falling prices in the financial markets without owning the asset itself. By placing a spread bet, you can potentially benefit when the price of the asset goes up or down.
The second benefit of spread betting is that there are hundreds of financial instruments to choose from. And in the case of spread betting stocks, you will still receive dividend payments where applicable when you are long (buy). As long as you have an open trade through the dividend payment date. However, please also bear in mind that if you are short (sell), or betting on a downward price movement during this time, your account will be debited the amount of the dividend.
Further to this, the most significant benefit is that spread betting profits are tax-free. In the UK, spread betting is exempt from stamp duties and capital gains tax. This may be subject to change and depend on your personal circumstances but you get to keep 100% of your profits.
There are also no trading commissions involved and you can spreadbet using leverage and margin.
This means you can get started with a relatively small amount of money and trade as if you have a much larger investment in the market.
When you open a spread betting account with TIOmarkets UK, you will also benefit from tight spreads and ultra fast transaction speeds in a safe and secure environment because we are regulated by the FCA.
Does this sound good? I will explain how you can open your spread betting account in just a moment. But first, let me show you;
How spread betting works
When spread betting in the financial markets, there is some important terminology you need to be aware of.
The first one is what we refer to as the spread. This is basically the difference between the buy and sell price of a financial asset. All financial assets have a spread and you buy on the higher price and sell on the lower price.
The next thing you need to know is that the spread and the price movement is measured in points. So let’s suppose that the FTSE 100 is trading at 7125.5 to sell and 7126.0 to buy. The spread is the difference between these two prices, which would be half a point.
If you were to buy the FTSE 100 at 7126.0 and then after some time sell at 7176.0, you would have captured 50 points. Your profit would be your bet size multiplied by these 50 points. However, if the FTSE 100 were to fall by 50 points to 7076.0 and you decide to sell, you would lose the equivalent amount.
With TIOmarkets UK, you can spreadbet from 50 pence per point to as much as you are comfortable with. So the more you bet, the more you can potentially profit or lose, it all depends on how far the price moves.
That is spread betting in a nutshell, it’s a simple option to get exposure in the financial markets but it is also important to know that spread betting is a leveraged product. This means that you need to have a very small margin deposited in your trading account to open the trades.
Execute a spread bet on the trading platform
The first thing you need to do is pick a market and a direction. In this example, I will be spread betting on the FTSE 100, but you can choose to spread bet on forex, stocks indices or commodities.
The second thing you need to do is decide on your stake, or how much to bet per point. I am going to choose one pound and enter that in the quote panel.
Then all you have to do is click buy or sell, to execute the trade.
It’s as simple as that, and while the trade is open, you can place a stop loss and take profit to help better manage it.
The stop loss will be triggered to close the trade at a predefined price if the price of the FTSE 100 moves in the opposite direction of your trade. The take profit will get triggered and close the trade at a predefined price if the price of the FTSE 100 reaches your objective.
When you have protected your trade by entering a stop loss and take profit on the trading platform, you can go about your business in the knowledge that your loss is predefined and your profits will automatically be taken.
Are you ready to start spread betting with TIOmarkets UK?
This is how you can get started within just a few minutes.
Head over to www.tiomarket.uk and log in to your secure client portal or register your profile if you are new to trading with us.
From within your secure client portal, click on create demo or live account. Choose the spread betting account type, choose MT5 as your trading platform and with GBP as the account base currency.
Then head over to the download center and download MT5 to your computer or smartphone. Check your email for the login credentials sent to you in the previous step and use these to log in to the trading platform.
And that’s it, create your account today and start spread betting with TIOmarkets UK.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how 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.
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