Spread Bet Stocks: Explained
Spread betting is a strategy that can be applied to many financial instruments: forex, indices, commodities, cryptocurrencies, share prices, treasuries, and blue-chip stocks. The philosophy behind it is simple: bet on which direction you think the market will go (high or low) and you will either make a profit or suffer a loss, depending on whether the market moves according to your wager.
There have been punters who earned millions of pounds and dollars after they spread bet on stocks and shares of Facebook and blue-chip companies like Apple, Alphabet (Google) and companies in the Dow Jones Industrial Average. As simple as the spread betting sounds, however, it takes experience and knowledge of how markets affect each other to fully capitalise on the strategy’s massive potential to generate earnings.
Let’s begin with the basics: below are the key things beginners need to know about spread betting on blue-chip stocks.
Spread Betting is Tax-Free
Spread betting in the UK is tax-free. It’s one of its biggest advantages over traditional investments where you have to pay stamp duty when you buy and sell shares, as well as capital gains tax (CGT) for any profits you make. This means that with spread betting, you can speculate without paying taxes before and after you close your bets. Best of all, you can take home all of your earnings.
Of course, you still need capital to sign up for a membership with a forex broker to access an online trading platform. You need to choose a broker and platform that allows spread betting on the financial instruments you’re interested in speculating.
Our trading platform at Fair Forex, for example, allows traders to spread bet on 564 stocks including blue chips listed on the Dow Jones Industrial Average (DOWJONES30), Nasdaq-100, and New York Stock Exchange (NYSE). We also host trading in 47 forex pairs, 16 indices, 39 commodities and 36 cryptocurrencies. Check out our Account Types for details.
No Need to Buy Stocks
Spread betting on stocks is one way to study market trends without incurring massive losses, and this is because you don’t need to buy stocks to spread bet on blue chips. All you have to do is accept the spread your broker offers.
Take note that commissions are not deducted from any earnings you generate from spread betting. The remuneration for the platform and trading services is included in the spread (the amount is minimal, however, because of the tax-free privilege for spread betting).
Learn When to Buy or Sell a Position
If the above discussion of buying, selling and spreads confused you, here’s a quick cheat-sheet you can use as reference:
- When you do spread betting, you agree on the spread your broker offers.
- The spread is the difference between the buy and sell prices.
- If you believe the price of blue-chip stocks or shares will rise, you buy or ‘go long.’
- If you believe the price of blue-chip stocks or shares will fall, you sell or ‘go short.’
The key to succeeding in spread betting is knowing when to buy, sell or close a position. It will be advantageous if you are in tune with the market of the blue-chip company you bet on. You also need to pay attention to the activities in the peripheral markets that might affect the performance of the blue-chip stocks you’re speculating on.
Find a Tight Spread
A good spread is a tight spread, which means that the difference between the buy (also called the offer) and sell (also called the bid) price is minimal. You can only make a profit in spread betting when the change in the underlying price (as it moves up or down) exceeds the amount of the spread. Hence, the tighter the spread, the faster it is for you to earn a profit.
How Spread Betting Works
Here is a quick review of how spread betting works:
Your broker will quote a spread for a blue-chip stock. If the underlying price of a stock is £101.5, the spread will likely be £100/£103 If you think the price will fall lower than £100, you can sell at this amount. Likewise, if you think the price will increase, you will buy at £103.
After deciding between buying or selling, you can then specify your bet per point movement. Suppose you decide to take a short position and bet £20 for every point the stock falls below £100. The £20 is your stake. If your prediction comes true and the stock price falls to where the sell/buy price is at £82/£85, you will earn a profit of £300.
Equation: (£100 – £85) x £20
If the reverse happens and the stock rises by 15 points, then you will lose £300.
Place Your Bets on Fair Forex
There are other things to consider as well, like margined or leveraged trading, margin calls, what to do when presented with a wide spread and more. Fair Forex is the best place to learn these as you’ll gain access to free trading materials and tools, as well as professional support from experienced spread bettors and traders via Fair Forex’s telegram chat group.
Learn to spread bet stocks with the best broker and online platform in the business. Register with Fair Forex today.
Nasdaq Spread Betting Platform
The UK is the leading market for spread betting with over 125,000 people in the country having active spread betting accounts. The Financial Conduct Authority (FCA) estimates that 400,000 more who are based abroad are also engaging in spread betting.
Given its popularity, Fair Forex sought to create a platform where investors can speculate on the losses and gains of overseas financial markets.
We’re happy to let you know that we’ve succeeded and that the Fair Forex trading platform now allows spread betting. Our clients can bet on blue chip stocks on the biggest and most popular indexes: NASDAQ (NASDAQ100), The Dow (DOWJONES30) and the New York Stock Exchange (NYSE).
Reasons to Speculate in Spread Betting on NASDAQ
Spread betting is legal in the UK and Ireland, a privilege that many residents in the country enjoy. It is also closely regulated primarily by the FCA and three other major governing bodies:
- The Prudential Regulation Authority
- The Financial Ombudsman Office
- The Financial Services Compensation Scheme
Investors, therefore, are protected against fraudulent and unethical practices by trading and investment companies. If proven guilty of investor deception, an investment firm can lose its license to operate. The FCA can also suspend the company or specific individuals from engaging in various trading and investment activities in addition to criminal prosecution.
Spread betting is a safe investment tool, and the only risk investors have to face would be choosing a losing position for their chosen index.
So why NASDAQ? This index consists of blue-chip stocks like the Wall Street (Dow) Daily, Wall Street (Dow) Futures, FTSE 100 Daily, S&P 500 Fortunes and more. You can also spread bet on famous NASDAQ100 shares, like Amazon, Apple, Google, Facebook, Microsoft and Starbucks.
The Benefits of Spread Betting
Spread betting is very friendly to the average person. With practice and substantial study about the historical performances and trends of the major indexes, you can take your capital further and generate income with only a marginal investment.
Here’s a closer look at the benefits that you can enjoy from spread betting:
1. Tax-free and commission-free
Spread bets are exempted from the UK Capital Gains Tax. If you earn something, you don’t need to pay a tax or stamp duty. All profits from your successful speculations are yours to keep.
The reason for this is that when you spread bet, you don’t own the underlying asset: you’re merely earning a profit from correctly guessing the highs and lows of the index.
Commissions, meanwhile, are not deducted from your income because the cost of using the platform and opening your position is included in the spread. You’ll be happy to know that Fair Forex offers competitive spread rates across different markets, so you can look forward to maximum returns on your investment.
2. Trade on leverage
A spread bet is a leveraged product: you don’t have to buy the entire underlying investment, but just a fraction of the overall value. This is known as the “margin.” So, if you want to place a bet on a spread for a blue chip stock with a 20% margin, you only have to pay for 20% of the total exposure as your deposit.
The advantage here is that even though your investment is only a margin of the share deal, the profits you earn are calculated based on the full size of your position. It’s highly possible, therefore, that the profits of a £200 spread bet would be equal to the profits of a £1000 share deal.
3. You can go short or long
Spread betting allows you to make money regardless of the direction of the market. In other words, you can generate a profit whether the market falls or rises. All you have to do is choose the correct position. If you believe that the market will rise, you’ll spread bet on a long position; and if you expect the market prices to fall, take a short position.
4. You can spread bet on a wide range of markets
Spread betting platforms like Fair Forex can give you access to different markets listed in indexes like NASDAQ, The Dow and the NYSE. You can speculate on a wide range of industries and the best US stocks. You can also cherry-pick markets that you know very well on just one platform.
Use Fair Forex Platform for Spread Betting
Take advantage of the benefits above by spread betting through Fair Forex. Like our forex trading platform, our NASDAQ Spread Betting platform provides useful information like mid-price charts with customisable ranges that allow you to examine trends over a specific period. Contact us to learn more about our trading platform.
Spread bet seamlessly with a secure provider, Fair Forex. Open an account today.
Dow Jones Spread Betting Platform
Dow Jones Spread Betting Platform: Spread Betting on the Dow
The forex market, with its complex weave of currency pairs, volatile markets and economic trend forecasting, can be overwhelming for an ordinary investor with little knowledge of forex markets and the drivers of currency exchange rate trends. Those who want to explore and enjoy gains from buying and selling currencies may find spread betting an easier alternative.
In this article, we will discuss the basics of spread betting and the potential of speculating on the price movements of blue chip stocks, specifically the Dow Jones Industrial Average (DJIA).
What Is Spread Betting?
Spread betting is a derivative trading instrument that is legal in the United Kingdom. Other countries like the United States consider it a form of gambling and therefore outlawed it. But in the UK, forex traders have it as a supplementary investment option as it is regulated as acceptable as betting at the Grand National.
Spread betting is all about speculation. Essentially, you will bet on whether the price of a currency will increase or decrease and by how much. If your bet turns out to be correct, you can earn profits for every pip increase or decrease in the currency rate, depending on the position you take. If the price moves opposite to what you predicted, you will lose by the same amount.
Here’s how it works:
Suppose you’ve already opened a spread betting account with your forex broker. When you give the signal that you want to do spread betting on a currency pair, your broker will give you the current prices at which you can buy and sell the currency:
You will be given a trade amount which will be the amount you trade per pip (the trade amount is determined through position sizing). You can also put a limit on how much you’ll want to bet on this spread.
Let’s say you’re limiting the risk on this bet at 2% of the £10,000 in your account, which is equivalent to £200.
Suppose you also expect the price of the euro to rise, so you take a long position and buy the currency at its current rate. Here now is your position:
Position (long): 5.00
The Price shows the original purchase price when you entered the trade. The Current price shows how much you can sell for if you close the trade at this instant — which in this case will give you a loss of £15.
You’ll want to wait for the Current price to at least rise by three pips and match up to the original purchase price so that you can break even (Profit/Loss will be at £0).
If your prediction turns out to be correct and the Eurodollar does rise, you’ll gain £5 for every pip increase in the Current price. So, if it increases by five pops from 1.2456 to 1.2461, you will offset the three-pip spread plus you gain by two pips. Your Profit/Loss will then become £10.
Once the Currency price increases by 43 pips to 1.2499, you’ll have gained £200. You can then close the trade if you’re satisfied with this gain, effectively buying the currency at £200 less than the new buy price.
Of course, if the price moved conversely and the Currency price fell, you will have lost £200 with a decrease of 40 pips.
Spread Betting on Dow
Fair Forex is glad to introduce spread betting as a brand-new feature on our trading platform. Investors can now speculate on blue chip stocks through our Dow Jones Spread Betting Platform.
So why Dow Jones? The Dow Jones Industrial Average is the most popular and most-watched American index. It is the weighted average of the leading 30 stocks in Nasdaq and the New York Stock Exchange and is considered as the health barometer for the U.S. economy.
As volatile as the DJIA is, many are spread betting on it because the potential for earning is high. The index can move several hundred points in just one day. With the right timing, and if you’re confident that you can correctly anticipate the trend of the index, it’s truly possible to earn substantial gains from spread betting at the Dow.
Other benefits of spread betting include:
- No deductions for commissions
- No stamp duty required
- Spread betting is open 24/7
Whether it’s your first time to foray into spread betting or entering the speculation market the DJIA again, Fair Forex provides a secure platform plus access to advisers and various risk-management tools that you can use to determine your stop-loss order.
Trade and bet through one of the industry’s fairest and most trustworthy brokers. Join Fair Forex today.
The Best Stock Platform for Beginners
The Best Stock Platform for Beginners
In the last week of January, the stock market received a lot of media attention because multitudes of average Janes and Joes essentially took on hedge funds when they decided to invest in GameStop shares. Hedge funds had been shorting the retailer’s stocks up to that point.
Soon, the movement managed to drastically raise the previously struggling stock price. It ended up becoming a big payday for many new investors.
It’s moments like these that spark interest in stock trading for many beginners. Choosing a platform is one of the first steps in getting started. This article will describe the qualities that make a platform reliable and beginner-friendly.
In dealing with financial institutions, reputation is one of the first and most important factors to consider when narrowing down the options. There are several signs that indicate if a stock brokerage is reputable.
One of the easiest ways to determine whether a brokerage is reliable is by going through the user comments. What are the people who actually use the platform saying about it? Although customer reviews should be taken with a grain of salt, if there are consistencies in the comments, there’s likely some truth to them.
Fraud protection and online security are also among the most important signs of reliability. The length of time the company has been in business can be a sign here. Brokerages with less secure platforms may not survive for long due to the inherent risks in financial dealings.
Having been in the foreign exchange industry for quite some time now, Fair Forex has established itself as a trusted platform for forex. Now, we are venturing into stock trading with all the confidence and experience we’ve gathered. We also have a long list of honest client reviews that express their satisfaction with our platform.
User experience is another area that should be examined. Since this is a list specifically for beginners, user-friendliness is an important factor to consider.
First of all, the website should be easy to navigate, especially for those who are not yet familiar with the technicalities of the market. Its design should be easily understandable and intuitive. Although things like the color or typeface may seem insignificant, they can make or break the user experience.
The availability of educational and research materials is also a top priority for beginner traders. These resources should be easily accessible, so users can further educate themselves about the current market and stock trading in general. These materials can come in the form of PDFs, newsletters, blogs, and other content formats.
Overall, the platform should be readily usable, even for a complete beginner. They should not feel lost and there should be materials to help them progress as traders.
Brokerages offer unique features that make their platforms more appealing to traders. Some of these features are more important for beginners than others.
Some platforms have robust portfolio construction tools. Although this feature will likely be better maximized by seasoned traders, it’s also wise to have the option early in the trading career so beginners can get used to building their portfolio.
Many also offer demo accounts so new traders can try their hand at buying and selling stocks without risking their investment capital. This can help them get used to market movements and how they impact the shares they hold.
At Fair Forex, we also offer spread betting feature which allows traders to invest in the movement of their chosen stocks. They can essentially bank on whether the stock will increase or decrease in value.
Lastly, a good trading platform offers clear pricing. Contrary to popular belief, the absence of trading fees doesn’t automatically make a platform ideal. In fact, some platforms may offer zero to no transaction fees but will charge their clients more elsewhere.
A clear pricing structure allows traders to weigh the pros and cons of using their platform. It better informs their decision whether to use it or not.
Some trading platforms also offer low minimum account balance requirements. This is also a good feature for beginners because they can start trading without investing a lot of money.
The stock market can be daunting, especially for new traders. It’s important to carefully consider the qualities and features of a platform before investing. Using this article as a reference is an excellent first step. Investopedia also offers an insightful list about this topic.
If you want a secure and conducive platform to start trading stocks, we are your partners.
Register here and begin trading.