We by now recognize that financial spread betting could be referred to as a ‘trading tool’ for the short term and via spread betting, you can trade major indices like the Dow Jones, the FTSE 100, the CAC, DAC along with other major indices like the Sensex and Nifty. You can even trade commodities, bonds and currency.
Many spread betting firms would be in a position to provide you with both kinds of accounts – deposit in addition to credit. But you need to be first conscious of a concept called the NTR or Notional Trading Requirement. This is the money that might be required at the very minimum for the bookmaker to release a position and that figure is typically the risk factor applicable and accounting for the expected volatility on the particular trading day. This figure would vary depending on what indices you are trading. For instance, if you want to bet £10 for every point about the Dow Jones futures trade, the NTR applicable might be as high as 400 times and hence you would have to pay £4000 as the minimum deposit to take that position.
Though spread betting is exciting, it’s not recommended for everyone as the possibility to suddenly lose money due to volatility in trade is much better. It is not for the fainthearted or for those who cannot bear losses. Be rest assured that through the day, there will be ups and downs in the trading pattern due to news flows, events all over the world, participation or the lack of it by foreign institutional players and so on. These have the ability to influence stock movement as well as in a leverage trade like spread betting, the results can be significant. It thus requires you if you wish to spread bet to be cool headed and not panic should the market take a direction unlike your position. It also calls for capability to ride losing for some time with the hope that things can change better just as it turned worse.
The main advantage of financial spread betting remains tax free income and the fact that there exists potential to make attractive gains by investing little capital because of leverage. As long as you can read market signals and take positions keeping risk/reward proportions in your mind, you should be capable of making good money out of financial spread betting.