Spread Betting for Your Investment Portfolio in Action - dummies

Spread Betting for Your Investment Portfolio in Action

By David Stevenson

Place yourself in the position of an advanced investor in the UK looking to put your money where your mouth is and get down and dirty with spread betting. Here check out such essentials as deciding on time frames and strategies, physically placing your bet, protecting yourself against the downsides and ensuring that you’re fully aware of the advantages and disadvantages.

Here is how you go about placing a bet that the FTSE 100 is going to rise in value. Most spread-betters use an online platform (you can use a telephone service if you prefer, but the Internet service is less expensive). Typically, you log on to the system with the aim of buying that index when it reaches a certain price and then follow these steps:

  1. Find an Order button of some sort on the website where you’re given a range of options. In this example you reckon that the FTSE is going to rise, so you click the Buy button.

  2. Work out what your stake is. Most trading systems default to £1 but you can probably bet as much per point as funds allow, usually with a minimum of £1.

  3. Gulp as you realise that you’ve started trading! When the market hits this value, your trade is automatically executed, although orders aren’t usually guaranteed.

  4. Set your stop-loss level – or enter a relative number of points (stops) away from your opening level at which you want to be stopped out. For example, 100 points (stops) below the level at which the buy order is executed and your position is closed if the market falls 100 points from your opening level.

  5. Enter a limit sell order as well, but in the opposite direction. I discuss limit orders later in ‘Working out your time frame and strategy’.

  6. Submit the order and confirm.

With these six steps, your order is complete. When executed, you usually receive an email confirming your action.