Spread betting is an option for people who fancy taking big risks for big rewards. It offers the opportunity to benefit from potentially uncapped winnings, but can also leave you vulnerable for substantial losses.
You can take out spread betting on almost anything. For example, you might bet how many goals a team might score in a season, or on house prices. However, one of the most interesting is in financial spread betting.
How does it work?
One of the most interesting aspects of spread betting is that it allows you to make money if the market falls. For this reason it's often used by investors to hedge against stock market drop off.
A spread betting company will normally offer shares at a sell and buy price - the difference between the two being known as the spread.
If you think the market will go up, you choose buy. This doesn't mean you're actually buying a share, but it means your performance will be linked to how it fares.
You'll wait until the market moves until the sell price is above the level you initially paid - at which point you can choose to sell.
If, on the other hand, you think the market is likely to go down you can opt to sell. Oddly you are choosing to theoretically sell stock you don't actually own.
What you're hoping will happen is the market will fall allowing you to buy back at a much lower price. You'll pocket the difference.
It's highly volatile offering plenty of reward as well as risk. The amount you make depends on the level of difference. So, it is quite possible that you're profits could be unmatched.
One of the most popular areas is in foreign exchange which can see plenty of movement in price. You can seek out the best forex spread betting platform for you using our financial spread betting comparison table.
Likewise, if the market goes against you, you'll have to pay money based on the difference. Again, your losses could in theory be limitless.
This is therefore an extremely volatile way to make money - one which might offer good rewards but has the potential for substantial losses.
Finding the best spread betting platform 2014
Which is best? Well, there is no easy answer. There are many different types of financial spread betting companies out there, all competing for your custom with various incentives and offers.
For example, some may offer to match any initial bet. Others may offer narrower spreads increasing your chances of making money. You can see financial spread betting platforms compared side by side on our handy spread betting comparison table.
To get started all you have to do is place a deposit. Because this deposit is less than the actual amount you're investing, this is a way to play with more money than you actually have.
Some companies may require a larger deposit, but will normally offset this by offering a more narrow spread. With so many companies, all competing against one another, you're in a good position as the customer, so you should remember to shop around until you find one which suits you.
Choose a spread betting company carefully
Spread betting can be immensely exciting and can get you quite a lot of money. Likewise the risks mean you should always be careful and make sure you have enough cash on hand to cover any potential losses.
It's a good idea to build up your experience first before you attempt to play for real. There are some people out there who enjoy financial spread betting for a living. However, like those who play online poker for a living, they tend to know the market inside out.
To find your feet you should find a place which offers a virtual spread betting service. This allows you to find your feet, without any of the associated risks.
To find the best platform, use our financial spread betting comparison table. You'll be able to compare the best online financial spread betting companies and find the one that works out best for you.