How to Spread Bet?

• Understanding Spread Betting
• Open a live trading account
• Choose your Trading Market
• Select your Spread Betting Platform
• Open, monitor and close your first position
• Example of Spread Betting

Spread betting allows investors to speculate on price movements in an underlying asset or market. It is an advanced trading technique that lets you bet a sum of money per point of price movement.

Note that spread betting uses leverage, which comes with pros and cons. On the positive side, leverage lets you control a larger position with a relatively small amount of capital allowing investors to realise gains calculated on the full position size.

On the negative side, leverage also amplifies losses should your trade go against you which carries significant risks and losses can exceed your initial deposit. Spread betting requires proper risk control techniques and the discipline to adhere to them.

Spread betting is attractive to some traders as profits are currently not subject to capital gains tax in the U.K. (Tax treatment depends on individual circumstances and may change in the future). Another feature is that traders can gain exposure to price action across a large variety of markets and assets including stocks, ETFs, commodities, indices, forex and more.

To start Spread Betting, you will first need to open an account with a trading platform. Here are the steps to follow for opening a trading account using Vantage:

1. Click here to go to our Account Opening page
2. Fill in the fields and click “Create Account”
3. Follow the on-screen prompts.
4. Once your account is approved, fund your account to start trading. You can start trading from as little as $50.
5. Choose your preferred trading platform. Vantage offers MT4 and MT5 platforms, and web-based trading.
6. Select your preferred market or asset to spread bet and place your first trade.

Want to try your hand at spread betting before making a live trade? You can do so with a demo account. Access real-time data, formulate your trading ideas and test your trades before without risking real money.

Once you’ve created a trading account, you can login and access over 15,000+ markets. Let’s take a closer look at some of the major markets for spread betting.

Forex

Forex is one of the world’s largest and most liquid financial markets, with daily trading volumes exceeding those of global stock markets. In forex, traders can speculate on the price movements in currency pairs ranging from major pairs such as USD/EUR or USD/JYP to minor pairs (GBP/AUD, EUR/CHF etc), and exotic pairs featuring currencies of emerging economies such as the Brazilian real.

Spread betting on forex markets enables traders to speculate on dynamic price movements to discover trading opportunities from short- to long-term timeframes. However, forex markets can be highly volatile and trading on leverage increases the risk of loss.

Indices

Indices are market benchmarks that track the performance of selected stocks listed on a country’s stock exchange. Component stocks are typically chosen based on strict criteria such as market capitalisation and sector and may be added or removed as the criteria evolve.

Many widely followed indices have come to be regarded as shorthand for the economies or sector they represent. For example, the S&P 500 is often taken as a barometer of the American stock market, while the NASDAQ is regarded as representative of the tech sector.

As such, spread betting on indices offers a way for traders to speculate on the economic performance of countries, regions or industries – by trading the relevant indices.

Shares and ETFs

Shares are ownership stakes issued by publicly listed companies as a means to raise capital from the investing public. Share prices are influenced by supply and demand levels, fluctuating as traders buy and sell their holdings. There is a wide variety of different types of shares available for trading, ranging from blue-chip stocks belonging to global leaders such as Apple, Facebook and Nvidia, to micro-cap stocks issued by smaller firms and startups.

Spread betting allows traders to gain exposure to share prices without ownership of underlying stocks. While ETFs may offer broader exposure and diversification risk associated with a single stock, they are still subject to market risk and may not be suitable for all investors.

Alternatively, investors can also spread bet on ETFs, which are baskets of different shares chosen according to stated objectives. This presents potentially lower risk than betting on individual stocks or shares.

Commodities

The trade of commodities such as energy, metals, raw materials and agricultural products plays an important role in the global economy. As a result, commodities markets are often liquid and actively traded.

Commodity trading usually requires physical ownership of goods which would typically be impractical for retail investors. However, with Spread Betting, it provides traders an alternative way to speculate on commodity price movements without owning the underlying goods. Another feature is the large variety of commodities available including gold, oil & gas, coffee beans, copper, livestock, etc. These can offer traders potential hedging opportunities based on the trading cycles of the respective commodities with potentially lower correlation to other markets.

Bonds

The bonds market generally involves the trading of government-issued or corporate-issued debt. Bonds are sensitive to interest rates adjustments which are typically in turn influenced by inflation and other economic factors. As interest rates go up, prices of older bonds tend to fall to match the yield of newer bonds. Conversely, when interest rates fall, older bonds tend to become more valuable.

Traders who follow interest rate trends may use spread betting to speculate on fluctuations in the bond market. They can do so without having to purchase or own bonds themselves.

Investment platforms generally offer a variety of trading platforms to suit the different needs and preferences of our clients. For spread betting, you may choose from the following:

• Web trading platform. A convenient option for on-the-go spread betting, ideal for those who prefer a desktop experience.
• MetaTrader 4. The premier trading platform, preferred for active traders of the forex markets. Offers a streamlined experience for spread bets on currency pairs.
• MetaTrader 5. Widely regarded as the most advanced trading platform, MetaTrader 5 offers a complete trading experience for beginners and veterans alike.

You can proceed to start trading Once you’ve registered your account, chosen your trading market and decided which trading platform to use.,. Follow these steps to open, monitor and close your first position.

In this example, we’re using the MetaTrader 5 platform.

1. Launch MetaTrader 5 and login to your account.
2. Firstly, set your trade size which determines how much leverage will be used in the trade.
   • In the top toolbar, go to Tools, Options, Trade. Under Volume, you can set your preferred lot size. By default, this is set to 0.10.
   • After setting your trade size, you’re now ready to begin trading.
3. To open your first position, click on New Order in the top toolbar.
   • Select the symbol representing the market you want to trade, as well as the trade type (Market Execution or Pending Order).
   • Choose Pending Order to configure your trade; this is where you can set up trades which will be triggered when the price reaches a certain level.
   • Once ready click on Place to open your first position.
4. Monitor your position via the toolbox in the bottom half of the display.
   • Click the Trade tab to see your open positions. Here, you can see important information about your trade such as instrument, trade type, volume, and current profit or loss
5. When ready, close your position
   • When you are ready to close your position, you can do so directly from the Trade tab.
   • Right-click on your trade and select Close Position to immediately close your trade. You can also click the X symbol found in the right to close your position instantly.

Spread betting example

Let’s run through a spread betting example using shares to illustrate how a spread bet works.

Assuming you want to spread be on shares of XZY Co., which is being quoted at 200/202. This means the Bid Price is $200 and the Ask Price is $202. The spread is $2.

Going long on XYZ Co.

You speculate that XYZ Co. will rise in price. Hence, you open a long position to buy the stock at $202, bidding $10 for every point of movement in the stock.

• If the price rises to $242, you would make a profit of [(242 - 202) X $10] = $400.
• However, if the price falls to 165, you’d make a loss of [(202 - 165) x $10] = $370.

Margin needed for long position

Assuming spread betting XYZ Co. requires a margin of 20%. Thus, here’s how much you need to put down in initial deposit:

• $202 x S$10 x 20% = $404
• Total position size = $2,020

Going short on XYZ Co.

If you believe the price of XYZ Co. will fall, you can spread bet by opening a short position, selling the stock at S$200. Similarly, you bid $10 per point of movement.

• If the stock falls in price to S$165, you’d make a profit of [(200 - 165) x $10] = $350.
• If the stock price goes against you, rising in price to S$242, you’d make a loss of [(242 - 200) x $10] = $420

Margin needed for short position

Assuming spread betting XYZ Co. requires a margin of 20%. Thus, here’s how much you need to put down in initial deposit:

• $200 x S$10 x 20% = $400
• Total position size = $2,000

Spread betting is a leveraged product and carries a high level of risk to your capital as prices may move rapidly against you. You could lose more than your initial investment and, in that situation, would be required to make further payments. As these products may not be suitable for all clients, please understand the risks sufficiently and seek independent advice, where necessary.