What is Spread Betting?

Spread betting is a derivative product that is tax-free (in permitted jurisdictions), which allows traders and investors to take advantage of price movements in stock, Forex and other underlying financial assets. It’s also known as a flexible form of trading because traders can bet on bearish and bullish price movements, taking short and long positions accordingly. This form of trading is also popular, because an investor’s profit-making opportunity is higher in comparison to other formats. You can take a position on both increasing or declining price movements. For instance, if you think the price of any underlying asset is likely to move higher in the coming days, you “go long” and create a BUY position. On the other hand, if you think the price is likely to decline, you “go short” or open a SELL position. Spread betting The profit generation depends only on the accuracy of your forecast and the size of your opening position. For instance, you have created a short position and the price of the underlying asset declines, your spread bet is profitable. However, if the price movement works against you, your spread bet will be a losing one.

What Is Spread?

The price you pay for opening a trade is known as spread. The spread is also known as the difference between the buy and sell prices.  Spread betting EUR/GBP These buy and sell orders are usually known as bid (sell) and ask (buy). This means that the trader will sell slightly lower than the middle price of the asset and will buy a bit higher than the middle price of the underlying asset. 

Why Do People Spread Bet?

  • Tax-free: Spread betting is free of tax (in certain jurisdictions where spread betting is permitted). You are not physically selling or buying shares or assets. The trader is only speculating on the future price of a financial market. With spread betting, the traders are eligible to trade a large number of markets even in the aftermarket hours.
  • Take profit and limit loss: The traders are eligible to take profit and limit losses according to the market conditions. 
  • Multiple assets and market: Spread betting is available on shares, Forex, indices, commodities and interest rates.
  • Going short: You can go short if you think the price of any particular asset is likely to go down.

Important Note: Trading financial derivative products, in particular spread betting products, involve high amounts of risk. If you don’t properly use stop losses, your initial investment is at risk. It’s also important to understand that spread betting is not suitable for traders that cannot afford to lose large sums of money. 

What to Look for in Choosing a Spread Betting Broker?

Choosing the best spread betting broker is one of the biggest and most important tasks before you start to trade. Brokers play a key role in profit making. Below are the key points that you need to research and complete your due-diligence before you invest money in spread betting:

  • Regulation: Before checking any other aspect about the broker, the traders are required to check whether the broker is regulated by financial authorities.
  • Spread betting platform: Once you are sure about the regulation status, the trader should check which type of trading platform the broker is offering. MT4 is among the most popular spread betting platforms. MT4 has tens of thousands of users at present.
  • What types of assets brokers offer: You should check what types of assets the broker offers for spread betting. Does the broker offer a wide range of investment opportunities? The diversification always helps in lowering risk and maximizing gains.
  • Fee structure: Fee structure is very important because several brokers impose hidden charges and commissions. Make sure the broker has a transparent and clear fee structure. Higher fee structure could negatively impact your overall earnings potential.
  • Deposit and withdrawal methods: Deposit and withdrawal methods are important. The majority of brokers nowadays offer all the popular online payment methods. You should check which payment method is suitable for you.
  • Demo account: Demo account helps both advanced investors and beginners. It helps in testing the platform.   

What Are the Best Spread Betting Brokers?

It’s quite difficult to check and review each broker. To help you out, we picked the top ten spread betting brokers that are safe and offer a vast range of products.

Pepperstone

Pepperstone is a well-known spread betting broker that offers this service to British and European traders. It permits users to trade indices, currencies, Forex and cryptocurrencies. It’s regulated by a number of authorities, including the FCA in the UK and ASIC in Australia. The broker offers access to various different types of trading platforms such as MT4, MT5 and cTrader. The users can access almost 70+ currency pairs, a range of cryptocurrencies as well as precious metals such as Gold. The minimum deposit requirement is $100. You can deposit and withdraw funds through various online payment methods.

Pros

  • Low betting fee         
  • Strong customer service
  • Easy deposit and withdrawal methods
  • Truly low cost trading and fast execution

Cons

  • Spread betting is available only on Forex
  • Lack of news analysis and market reports
  • Lack of protection for non-EU clients

ActivTrades

The broker permits traders to use both MetaTrader5 and MetaTrader4 platforms for spread betting. ActivTrades’ MT5 spread betting offers instant execution, while on MT4 its market execution is slower. Established in 2001, the broker offers strong customer support in almost 14 different languages. You can trade Forex and several other assets through this broker. It also ensures that trades are executed at the best available price, with no requisites and no rejections. The pricing structure is also transparent.

Pros

  • Commission free trading
  • Strong trading tools and advanced charting features
  • Training courses
  • Negative balance protection
  • Regulated by multiple authorities

Cons

  • Does not accept US client
  • Accounts types are limited
  • No fixed spread betting

Markets.com

It’s one of the most famous and secure platforms for spread betting. In addition to this, it’s regulated by top rated authorities. The platform permits traders to trade thousands of instruments, across commodities, Forex, and stocks, in global markets. It’s one of the best platforms for both advanced and new investors because of its user friendly interface.

Pros

  • Wide range of instruments
  • Regulated by multiple authorities
  • One of the best spread betting platforms
  • Fast execution

Cons

  • Low leverage
  • Complex deposits and withdrawals

FXCM

It’s an international online Forex and CFD broker that has a history of over two years. The platform is fully regulated and licensed by top rate European and British authorities. The platform permits traders to trade currencies, indices, stocks and cryptocurrencies. You can also use their educational material to learn about spread betting and other trading strategies.       

Pros

  • Competitive spreads
  • Low fees structure
  • No deposit or withdrawal fee
  • Fast Returns

Cons

  • Inactivity fee is imposed after a year
  • Traders with low deposits may face some disadvantages

FXTM

FXTM is one of the leading spread betting brokers that accept clients across the world. It’s also an ECN broker. The platform permits traders to use MT4 and MT5 software to trade currencies, stocks, indices and other instruments. It does not charge a hidden fee and its fee structure is transparent. When you use ECN account options, the spreads can be as low as 0.1 points, while spreads will be a little higher with the standard account. The platform offers various types of trading accounts according to traders’ needs. The minimum deposit requirement is USD$100 on a standard account.

Pros

  • Strong customer service
  • A lot of educational material
  • Easy and fast account opening

Cons

  • Limited product portfolio
  • High fee on stock CFDs
  • Withdrawal and Inactivity fees

 IG Markets

IG Markets was founded in 1974 and it’s among the world’s oldest spread betting brokers. It has hundreds of thousands of clients across the world. IG Markets also accepts clients from the United States. You can also use multiple trading software programs through their proprietary platform. This software includes MT4, MT5 and cTrader. It’s also known for offering access to a broad range of markets, comprehensive client education and superior research. The platform has a clear and transparent fee structure, while its commissions, spreads and fees are also very competitive. It’s advanced charting features and trading tools help in analysing market conditions.

Pros

  • One of the best trading platforms         
  • Excellent educational material  
  • Easy deposit and withdrawal methods

Cons

  • High fee on stock CFDs
  • Lack of phone support

eToro

 eToro is one of the most trusted online spread betting brokers with a strong historical background and solid trader reviews. With the minimum deposit requirement of USD$100, you can trade a broad range of markets and instruments including bonds, commodities, energies, indices, and stocks. The account creation process is simple and free. You can use various types of methods to deposit funds into eToro accounts. Its copy trading feature permits traders to copy the trading strategies of other traders. It’s a regulated and licensed broker.

Pros

  • Stock and ETF trading is free
  • Competitive spreads
  • Easy account opening process 
  • Social trading is available

Cons

  • High Forex fees
  • Withdrawals could take a longer time

City Index

You can use City Index for spread betting on a range of products. Its platform is simple and user friendly, with a lot of educational material and premium research tools. Low minimum deposit requirements, along with transparent fee structure are among the best features of this platform. The platform also permits traders to use MT4 as well as its proprietary trading software. You can also easily reach the support team for help if needed. The platform also permits traders to withdraw funds anytime they want.

Pros

  • Demo account
  • Fast Deposit and withdrawal
  • Excellent trading platform
  • MetaTrader is available

Cons

  • No volume discounts
  • No social trading data
  • Margin discounts restricted to professional accounts

FxPro

FxPro accepts clients from across the world and it’s a regulated broker for spread betting on almost 250+ financial instruments that covers futures, Forex, indices, shares, energies and commodities. It also offers cTrader, MetaTrader 4, MetaTrader 5 platforms. Traders also have the opportunity of using their proprietary, feature-rich FxPro Trading Platform for spread betting. FXPro is an award-winning broker that regulated by the Cyprus Securities and Exchange Commission (CySEC) and UK Financial Conduct Authority (FCA). The broker is also working under the strict guidelines of the Financial Sector Conduct Authority of South Africa (FSCA) and the Securities Commission of the Bahamas (SCB).

Pros

  • Wide range of market instruments
  • Segregated accounts
  • Multiple account types
  • Low commissions on spread betting

Cons

  • Crypto trading is not available
  • Spreads are not tight
  • US clients are not accepted

AvaTrade

Established in 2006, AvaTrade currently has four offices around the world. It’s a regulated Forex, spread betting and CFD broker. It also works as an ECN broker. It offers MetaTrader software on its platform. It’s working under the European, Australian and Japanese regulatory authorities. You can select between various types of trading accounts based on your trading needs. The platform also offers Islamic accounts.

Pros

  • Simple and fast account opening
  • Various accounts types
  • Extensive research tools

Cons

  • Lack of phone support
  • Spreads are not as low as competitor’s offers
  • Limited deposit methods
 

You can open an AvaTrade account here, using our AvaTrade partner code

What Are Risks With Spread Betting?

Like other forms of investment, there are a lot of risks associated with spread betting. Therefore, it’s important to know about the risk factors before choosing a top spread betting broker and depositing real money. It’s also important to know the financial trading risks in general. There are many risks associated with spread betting, including risks related to leverage, market volatility account close-out and market gapping.

Conclusion

Spread betting is one of the main ways to generate big returns in the short-term, both in a bullish and bearish market environment. This is because traders can go long or short according to the market circumstances. Traders should also check and understand the risks associated with spread betting. Broker selection also plays a key role in profit generation. We have highlighted the top ten spread betting brokers above, with complete pros and cons.                                                                                                                                               

Frequently Asked Questions

Is Spread Betting Safe?

Spread betting is not safe. It comes with a lot of risks. If you don’t properly adjust stop losses and profit take orders, you can lose money. You also need a lot of trading knowledge before spread betting.

Can You Only Go Long in Spread Betting?

Traders are able to go short or long depending on the market circumstances. If you think the price of an asset will go up, you can go long. On the other hand, if you think the price will move down, you can short the asset.

Is It Ok to Spread Bet With an ECN Broker?

Yes, hundreds of top rated brokers are using MetaTrader and other software programs on their platform. Trading with a registered ECN broker is safe.

Is Spread Betting Legal?

Yes, spread betting is legal in a majority of countries. However, it’s illegal in the United States, among others.