Choosing a Financial Spread Betting Provider - dummies

Choosing a Financial Spread Betting Provider

Part of Financial Spread Betting For Dummies Cheat Sheet (UK Edition)

A wide range of financial spread betting providers compete for your money in the UK – from specialist firms to stock brokers, financial advisers, banks and bookies. On the upside, the number of providers on offer means they need to compete harder on price and service levels to keep your business. But it also means that you need to do your homework to ensure that you’re dealing with a firm that’s reputable and will manage your account fairly.

The following info helps you compare providers to make the best choice for your needs.

  • Margins and spreads: Price – the width in points in the spreads on popular markets – has become an increasingly competitive aspect for brokers, with many now offering only one point or even zero point trading on indices. In addition, margin rates vary. If you imagine your trading will be focusing on one or a small number of markets, shop around to see who’s able to offer the best rates.

  • Education: Some firms offer more education than others. If you’re new to spread betting, you may want to start trading with a firm that can provide free educational material such as podcasts, guides to trading and seminars to support you early on. This can include webinars if you live too remotely to get into a major town.

  • Range of markets: All spread betting firms aren’t created equal in this respect – most offer the favourite markets, like the FTSE 100 and the GBP/USD currency pair, but if you’re looking for something more esoteric, like rough rice or a mid-cap share, the larger firms are more likely to be able to help you.

  • Trading platform: Many of the leading brokers now offer proprietary trading platforms, but some are better than others. Increasingly, the platforms are web-based, but older versions require downloading onto a computer. Other firms use third-party trading software.

  • Mobile trading: In the last few years mobile trading has become an important factor in spread betting, with some brokers reporting over a third of their bets now coming in via mobile devices. Brokers tend to launch trading apps for the iPhone and iPad first, and then follow with Android after these have been successfully road-tested. If you think you’ll want to trade on the move, check whether mobile trading facilities are available.

  • Stop losses: See the later section on ‘Placing Orders’. Some brokers are better at honouring your stops than others. Most of the time, this depends on the liquidity of the underlying market and the broker’s ability to hedge risk, but generally speaking, brokers are quite efficient at this. Some now offer guaranteed stop losses. One of the best ways to check out how good a provider is at executing stops is to talk to other traders online – there are plenty of trading forums where you should be able to find current and former clients of most of the UK spread betting firms.

  • Demo accounts: Some firms now offer demo accounts that let you trade with play money, helping you to hone your skills and learn on their trading platform. The degree of access you’re granted varies – some only let you trade a small number of markets, and others expect you to fund your account after a period of time with real money.

    Depending on your provider, you may receive the software for free or pay a fee. Some brokers charge for the software, because they need to pay the company that provides them with the software. However, charges are often negotiable and depend on how much business you do with the provider during a month. The more trades you make, the lower the software charge you pay.