Financial spread betting is preferred by some traders over more orthodox instruments as a result of the many different advantages spread trading can provide. For those that are interested in maximising the money they can make from the markets, spread betting can provide the answer through delivering substantial multiples of the original stake for positions that perform well. In a nutshell, it’s impossible to say how much you can from spread betting with any certainty, but it remains one of the more profitable ways to leverage market positions, and certainly one of the most cost effective ways of maximising market returns. But what is it about spread betting that makes it so profitable, and how can traders use the spread betting mechanism to maximise the money they make from trading?
Key Points: Are Spread Betting Earnings Limited?
One of the core benefits of spread betting is that earnings are totally uncapped (the same applies to losses, although some brokers provide negative balance protection), with the potential for traders to ride the market for as long as they like. This feature of spread betting makes spread betting inherently attractive as a trading style, with every single upwards point an extra multiple of your initial stake.
And traders should have no fears about their brokers capping winnings – remember that brokers have your position covered, either through other traders or hedging on the futures market, and so prefer traders to succeed. After all, successful traders are likely to place larger wagers, and execute more frequent trades, which will all contribute to the bottom line of the spread betting broker.
Financial spread betting has been a favourite method of realising leveraged returns since the 1970s, with traders flocking to financial spread betting as a way of driving cost-efficient, highly leveraged gains from market movements. As a result of the unique structure of spread betting transactions, traders can essentially both win and loss an unlimited amount of money, with the trade ‘stake’ calculated on a per point basis and applied with a positive or negative multiple respectively for each tick in market movement either direction.
Because spread betting is so streamlined as a transaction, with a view to securing maximum profitability for those who trade it, it can deliver vast returns in short periods of time when traded correctly. As a result, it’s up to individual traders to decide how successful they want to be, and ultimately how much money they can make from spread betting.
Unlimited Potential Upside
One of the key advantages of spread betting as an investment vehicle is that it provides unlimited potential gains, with an additional multiple of the original stake added for each point movement in a favourable direction. This means that in instances where traders are anticipating markets to trend heavily in a particular direction, spread betting is often the best method of market access given the scope for continued, multiple earnings as positions grow and develop.
While the upside element of spread betting is of particular value and significance for those looking to trade on financial markets, it’s worth remembering that these same forces are equally applicable on the downside, and positions that move against the trader can quickly rack up losses, with unlimited negative potential. As a consequence, traders need to ensure they maximise the positives and minimise the negatives, to benefit fully from what spread betting has to offer.