The discussion as to the appropriateness of financial spread betting as a way to invest is frequently up for debate. Indeed, it is merely a form of online gambling – isn’t it? To achieve better insight of the argument, it is sensible to study the facts. Spread betting is a derivatives product offered by online financial brokers. They provide a platform to anyone who wants to play the market and in essence guess on financial market movements. As such, the trader never actually purchases the underlying product, and could make profit from falling markets just the same as from rising ones. Spread betting is officially classed as a financial product and is only provided by firms that are governed by the FSA. Trading is dependent on margin, similarly to CFDs trading. In most cases however, spread betting traders are not subject to CGT and frequently commission is not charged. With a comparatively small amount of money a trader can begin placing so-called ‘bets’ on a variety of markets. These may include stocks, indices, commodities and currencies.
Bets held by a spread better are never usually open for longer than 24 hours – it is a fast-paced method of making money.Therefore, assuming these basic facts, can we conclude that spread betting is truly a type of gambling? The answer is “no”. As a completely governed activity, financial spread betting cannot be classed as a type of sport. A spread betting broker must abide by a strict code of conduct to allowed to offer accounts and a base for trade.Indeed, countless investors who partake in other versions of online investment, such as foreign exchange, do financial spread betting as an extra means to make money. Yet is it a recommended means of investment?
Recently, high-risk speculation on the foreign exchange market has been put in the firing line by many politicians and financial analysts who argue that it can bring serious economic problems. Some have even accused derivatives trading as one of the main causes of the severe downturn of 2009. Because traders can make returns out of a retreating market, commentators have argued that risk-taking can end up aggressive and out of control – thus driving the problems of currencies like the euro in the last few months.Whoever does choose to partake in financial spread betting should acquaint themselves with the serious amount of risk that is involved. Foreign exchange markets can alter suddenly and unpredictably, meaning a position that might have seemed winning moments ago can suddenly switch in the other direction, leaving the trader with significant losses.