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A spread bet is a bet on the future movement of an underlying instrument. Spread betting is unique in the sense that you are predicting the movement of an instrument and you never actually own it. Spread betting offers a tax free way to make money, which is appealing to many investors.(Keeping in mind tax laws can always change or may differ depending on your personal circumstances).
An example of spread betting - commodities
Gold is a commodity, and it is a particularly popular commodity to spread bet. Why spread bet on gold? For many hundreds of years gold has been used as a form of currency and investment. What sets gold apart from other elements on earth is the fact that is it virtually indestructible. Spread betting on gold is an exciting prospect, as you’re able to predict its movement without actually having to own it.
There are other metals in which you can speculate movement, for example is silver, copper, aluminium, uranium, platinum or palladium. Commodities are classed as volatile as they have factors affecting their production. For example with aluminium a lot of energy is needed to produce aluminium so prices for it tend to be stressed by the cost of energy. Silver isn’t as popular as gold but it is used in many ways, for example it is used in electronics such as mobile phones and in the pharmaceutical market where it is a natural anti-bacterial metal.
What are the risks of spread betting?
Like with any form of gambling or betting, there are risks involved. It is important to have an effective risk management strategy. This is important as financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. It is not something that is suited to everyone so it is wise to fully understand the risks involved.
Seminars
What’s the best thing to do before starting to spread bet? Participate in an online spread betting seminar, or an office spread betting seminar. This is one of the best ways to learn spread betting. The beauty of online seminars are they teach you the basics of spread betting so you have an understanding before using real money. Whether you’re a newbie to spread betting or an expert alike, you’re certain to learn a trick or two from the online or office seminars.
Demo Account
After you’ve done your reading about spread betting, and participated in various seminars, there is another logical step before opening a live account, what is this step? Open a practise demo account. Demo accounts offer so many advantages, as you’re able to learn the ins and outs of the dealing platform without jeopardising your real money. Practising on the demo account gives you’re the opportunity to learn the platform without losing money. You may also find it worthwhile to learn the difference between spread betting and CFD Trading. The more knowledge you have the more confident you’ll be at spread betting or CFD trading.