Best Spread Betting Company 2021
The following article is an informative overview of the lucrative investment practice of spread betting. We have conducted thorough research into all aspects of spread betting, laying everything out for your analysis. In this article, you will discover what exactly spread betting is, the accounts involved, and how it really works.
As well, you will learn of the pros and cons spread betting has to offer, why it is so popular among investors, and whether spread betting is right for you. So, delve into this informative article, and learn everything there is to know about spread betting.
The brokers below represent the best Spread Betting brokers.
|Broker||Rating||Official Site||Regulations||Min Deposit||Max Leverage||Trading Platforms||Foundation Year||Publicly Traded||Trading Desk Type||Currencies||Commodities||Indices||Stocks||Crypto||Commission on trades||Fixed spreads||offers promotions||Official Site|
CFDs carry risk. 73% of traders lose
ASIC, CySEC, FCA, FSCA
MT4, MT5, Proprietary
CFDs carry risk. 73% of traders lose
74.74% of retail investor accounts lose money
ASIC, FCA, FSP
Dealing Desk, Market Maker
74.74% of retail investor accounts lose money
82% of retail CFD accounts lose money
CySEC, FCA, FSC
No dealing desk
82% of retail CFD accounts lose money
Markets.com was founded in 2008 and was rebranded in 2019 to MarketsX, alongside the introduction of Marketsi in 2020 to invest in real stocks and shares. The broker is part of the TradeTech Group which is a constituent of Playtech PLC, a FTSE 250 company listed on the London Stock Exchange.
The Markets.com group offers regulation from the Cyprus Securities and Exchange Commission (CySEC), the British Virgin Islands Financial Services Commission (FSC), the UK Financial Conduct Authority (FCA), the Australian Securities and Investments Commission (ASIC) and the Financial Sector Conduct Authority of South Africa (FSCA).
With MarketsX users can trade commission-free on more than 2,200+ CFD instruments covering Shares, Indices, Bonds, Blends, Commodities, Currencies, ETFs and Cryptos. Users can also invest in real stocks and shares via a Marketsi account which comes with an innovative Investment Strategy Builder tool.
Founded in 1999, FXCM Group is an international online forex and CFD brokerage brand. In the UK, the FXCM brand is managed by FXCM Ltd. The company is based in the UK and its head office is located at 20 Gresham Street, 4th Floor, London EC2V 7JE, United Kingdom.
Now FXCM offers the trading of currencies (majors and exotics), indices, cryptocurrencies and commodities. They have a selection of platforms as well as algo trading, in depth education and market research.
This company was established in 2011 and is now present in many regions. It is regulated by FCA in the UK and by CySEC in Cyprus and offers over 250 assets including 50 currencies, 5 metals, 3 commodities, 180 share CFD’s, 5 indices and 3 cryptocurrencies. The broker gives traders access to both the MT4 and MT5 platforms.
What is Spread Betting?
Spread betting is an investing method based on the speculation of price movements in a financial market. Instead of actually buying and trading a financial instrument, the investor speculates on whether the price will go up or down in a determined amount of time. The spread betting broker quotes two prices, a bid and an offer/asking price, (the spread is between these two prices). An investor then speculates on which way the price will go and places a bet on the direction the assets price will move. So, an investor places the bet on whether the price will go above or below the spread.
In forex spread betting, for every pip the currency moves, you gain or lose the amount you bet per pip, depending on which direction you speculate it would go. Depending on how much the price moves determines your profit or loss. For example, if the price moves 10 points (pips) up, and you bet $5 per pip, you would then gain $50, or say it moves 5 pips down, you then lose $25.
What is a Spread Betting Account?
A spread betting account enables an investor to participate in the practice of spread betting. Most brokers allow spread betting; however, they may require the investor to reside under the same jurisdiction as their regulation. It is highly recommended you go with a brokerage who is highly reputable and regulated. Most accounts are free to open, but require a minimum deposit to begin spread betting.
There are a variety of accounts to choose from for spread betting. Not all of them offer the same financial instruments, there is a wide range of markets they might offer. As well, many have different rules, fees, and structures. See the account types below.
- To help you decide if an account is right for you, many firms offer a Demo Account. A demo account enables you to practice using the platform and its features using virtual money.
- Another type of account is the Standard Account. This account requires you to deposit funds before you start spread betting. Your profits and losses are added or subtracted from this balance.
- A Credit Account requires no deposit on your part, and only requires a strong credit score and proof of sufficient cash reserves. This type of account is reserved strictly for more experienced traders.
- Another account which is similar to a standard account is a Limited Risk Deposit Account. This account only allows you to place spread bets if they have a ‘Guaranteed Stop Loss Order’ (GSLO). Which means each spread bet must have a predetermined stop-loss order. This type of account is attractive to beginner spread betters looking to minimize their potential losses and learn the market.
How Does Spread Betting Work?
Spread betting is really, quite simple. In a way, it’s like gambling with 50-50 percent odds of coming out on top. However, it is more calculated and analytical than gambling, hence being viewed as a viable investment strategy rather than gambling. So, how does spread betting work?
First, when opening a spread betting position on the market, you are given two prices; a bid (buy) and an offer (sell) price. These prices are on either side of the underlying market- this is called a spread. Depending on what you think the market will do, you place your bet accordingly. If you believe the market will rise, you bet at the buying price. If you believe it will fall, you bet at the sell price. The more the market moves in your favor, the greater you profit. Every point or pip moved in the direction you bet, results in profit, and vice versa for losses.
Why is Spread Betting Popular with Investors?
Spread betting is very popular among investors of all levels. Investors see the opportunities it presents and the numerous benefits spread betting provides. See below, the key factors that make spread betting so popular among investors.
- Profits are Tax Free- One of the most attractive benefits of spread betting is that it’s tax free in the UK and Ireland. It’s not legal in the US, but that doesn’t stop some Americans from spread betting. However, if they do many to spread bet they are still subject to income tax.
- Lack of Fees- Most brokerages offer the use of a spread betting account without any commissions or fees. This facet is highly popular among investors.
- No Stamp Duty- Again, there are no additional taxes for any documentation involved in spread betting.
- Geared Trading- The positive aspect of geared trading allows you to maximize your potential profits with a lower investment, rather than buying the assets. However, this comes with a great amount of risk as well.
- Two-way Trading- In spread betting you can profit in both a bull and bear market. Meaning you can bet on the price going up, or going down.
- Stop Loss Orders- Limiting risk orders such as stop loss orders allows investors to mitigate their risk level and minimize potential losses.
- Small Amount of Investment Capital Needed- Most companies require only a small deposit of around £100-£200. In addition to this, traders can also bet in small sizes of £1 per point/pip.
- Wide Array of Financial Instruments- Spread betting companies allows investors to trade with a variety of products and markets such as; Equities, Indices, Forex, Commodities, Interest Rates, and Bonds. With such a wide array of financial instruments to choose from, almost any investor can potentially be attracted to spread betting.
- Versatility & Freedom- Many platforms offer the option to trade directly form a mobile device such as a smart phone or tablet with a trading app. As well, investors can trade online or over the phone.
- Trading Hours- Several financial markets are available to trade out of the standard trading hours, giving it a more relaxed approach to trading.
Spread Betting Commissions
Spread betting does not have any additional commissions. Brokerages make their money through the spread, meaning all trading costs are built in. The brokerage calculates the commission cost into the spread, so what you see is what you get. There are no unexpected fees or charges for using a spread betting account or conducting trades on the account.
Spread Betting Pros and Cons
Spread betting offers investors numerous benefits, which is why it is so popular among investors. In addition to the list of why spread betting is so popular, see the pros and cons of spread betting below.
- Profits are tax free, which is beneficial for two reasons. One being there will be more money in your pocket, and two, there is less paper work, documents, and hassle involved with this type of investment.
- Spread betting is relatively easy to understand compared to other forms of financial instruments.
- There is potential for large returns on small investments due to the high amount of leverage.
- There are no additional costs or commissions. You make exactly what you see because the commissions and fees are built into the spread.
- Small investment capital needed to start trading.
- 24/7 trading hours availability
- Controlled risk bets available, which is betting with a stop loss attached to the trade.
- There are thousands of financial markets to trade with.
- Hedging investment strategies can be implemented in spread betting.
Now that we have displayed the numerous benefits of spread trading, what are the disadvantages or risks involved?
- Holding positions for a long time can be costly. There is a daily financing cost, which can cost around 5-9% per annum.
- You should be well informed about the market direction.
- Spread betting boasts no commissions and no fees, but nothing comes for free. There are hidden costs built into the spread.
- The spreads are a little larger than in the stock markets, so you need to achieve greater gains to make a profit.
- Closing is not as easy as it should be. Sometimes you will be requoted when trying to close. This is caused from the spread betting company waiting for the market to be in their favor.
- Geared trading in spread betting can result in substantial gains, but also cause massive losses.
- If you are not from the UK you may not be aloud to spread bet. However, some companies allow international clients. Also, spread betting is illegal in the US.
- Spread betting may be available to practice 24 hrs a day, but the spreads tend to increase in after hours trading.
- A big disadvantage is that you can lose more than your initial capital, that is if you are betting without stop losses.
Is Spread Betting for Me?
Spread betting is a popular option among traders and there’s a good chance it’s right for you too. As an investor, you might want to partake in this lucrative investment endeavour for the following reasons:
- If you are an active trader looking to benefit from tax-free profits, low investment costs, and no commissions or fees.
- If you want to diversify your portfolio, spread betting can satisfy those needs. With over 15 thousand markets to trade on, there is something for everyone.
- If you are interested in the markets, what causes price fluctuations, and predicting outcomes, there is no better option to satisfy these interests.
- If you want to add more diversity and flexibility to your investment capital, you can do so by spread betting’s leverage.
The types of investors who enjoy spread betting follow a variety of trading methodologies. Spread betting is something that can attract anyone. Some common investor types who delve into spread betting are; market enthusiasts, day traders, short to medium term traders, long term investors, and diversifiers. So, as you can see, spread betting can really be for anyone. The only factor that may cause spread betting to be unsuitable for someone, is if they reside in a country which spread betting is illegal, such as America.
Trade With A Regulated Broker
- Your capital is at risk