Practical Issues for Spread Betting in the UK - dummies

By David Stevenson

Here are some spread-betting techniques and approaches you might want to use for your investment portfolio in the UK. You need to think about a few basic features when operating a spread-betting account:

  • Tight-dealing spreads: The tighter the spread, the more money you can make. With a major index, look for one offering 2 or maybe 4 basis points. (Wider spreads result in higher asking prices and lower bid prices, which means you pay more when you buy and get less when you sell.)

    As a rule, the longer the period of the bet, the wider the spread and the more the broker is charging you to trade.

  • Spreads: They’re generally lowest for bets that remain open only until the end of the trading day. (Spreads fluctuate during the trading day, and they tend to be low when the market is relatively calm. When the spread is low, you can simultaneously buy and sell positions with the intent of closing both when the spread is at its maximum level, thereby limiting risk and maximising your chances of earning a profit.)

  • Margin calls: If you can find a broker who offers low margin requirements that’s a huge plus. Many brokers typically offer 2–10 per cent, although margins on foreign currency trading can be as low as 0.75–2 per cent.

  • Other factors to watch out for: A minimum bet size of just 50 pence on selected markets; the ability to negotiate the bet size; £1 is usually the minimum trade amount, but the maximum can be much larger, perhaps £1,000 or even £3,000 a point.