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Spread Betting Explained

If you are looking for a less complicated and more enjoyable investment in the finance markets, you might want to consider financial spread betting.

In basic terms, financial spread betting is simply making a prevision about which way the share price is going to move, up or down.

Spread betting will require an equal amount of prowess in predicting market movements to be successful and garner profits. The amount of money will depend on the stakes you are able to afford. When spread betting, the price of the bet is calculated per point that the market moves up or down. Fluctuations in price can result in dramatic gains or losses. Spread betting may be beneficial to you over stock trading for quite a few reasons:

  • No Capital Gains Tax

When trading stocks, if you incur a profit, depending on your country, this profit may be taxable. In comparison, for citizens of the UK spread betting is free from capital gains tax, thus if you choose to invest in spread betting over share trading, you may find it more profitable primarily due to the absence of capital gains tax.

  • No cut for broker

Awarding an allowance of your profit to your broker can greatly affect the balance of your money supply if you have several financial commitments. Granted, without your broker you may not profit at all. However, being able to prevent this cost can prove greatly beneficial. With spread betting, the commission for you broker is eliminated as they make their money from the small spreads between the quoted buying and selling price.

  • No stamp duty

Stamp duty is a miscellaneous cost associated with share trading that you usually don't account for but it certainly adds up. With spread betting, there is no stamp duty present which eventually can add to your overall profit.

As you can see there are numerous benefits of investing via spread betting. However, the success of your spread betting ventures in comparison to standard share trading will be mainly down to your trading plan and risk profile. Even though it costs less to spread bet you won't make money unless you know what you are doing. Despite the term spread "betting", your success will be governed by your innate skill on predicting the future state of the market, and having a rigid risk strategy. In the world of finance, despite any educated research before trading, there is always an element of chance involved.

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