Financial spread betting has experienced something of an explosion, fuelled in no small part by the extensive efforts of the large online brokers and a growing prevalence of high-speed internet connections with financially and technologically savvy owners. Its popularity has seen unprecedented growth as far as trading innovations go, and from an elitist, secret, niche investment method spread betting has grown to become one of the most prominent ways the UK public accesses the world markets. But what exactly is it about spread betting that has made it such a popular medium for trading?
Spread betting is, unlike long-term stock investing, an exciting, short-term investment method, where traders see results as they happen. Taking place over a micro-scale in investment terms, spread betting allows traders to win (and lose) in just one day, hour, or even minute, depending on how fast-paced you like your trading (see full list of spread betting advantages).
For the consumer investment market, this coupled with an apparent simplicity in the structure of the spread betting proposition (what is spread betting?), and the lower barriers to entry for all markets makes spread betting an attractive option. Rather than being forced to commit hundreds or even thousands of pounds to secure a position in the market of your choosing, spread bettors can effectively achieve the same exposure for a £1 stake, with the potential for multiple times the proportional gain in minutes, thus for many small-time or individual traders, it’s often a no-brainer (make sure you fully understand the risks involved in spread betting).
What Makes Spread Betting So Popular?
The route to spread betting success is paved with the promise of massive returns, and it would be naïve to overlook its potential for generating significant incomes as one of spread betting’s major pull factors. Because stakes multiply with every incremental point that’s gained on a position, traders who have bet £1 per point could realistically see themselves earning 10 or even a hundred or more times their original stake back if positions move in their favour. While other investment styles have their own distinct advantages, no share or future contract will ever deliver these kinds of returns in such a short space of time.
But any hypothesis of spread betting’s popularity, particularly amongst more experienced traders and professional funds, would be incomplete without mention of its tax efficiency. Arguably its raison d’être, spread betting is a much more efficient way of trading most assets, given than no form of ownership ever takes place on which the gains can be taxed. This results in more money in the pockets of successful traders, which can never be a bad thing.
Trade from Home or on The Move
Part of the beauty of spread betting is that there is no need to be chained to your trading desk throughout the day. Positions can be set to respond to stop losses, which automatically cut out positions when their value falls to a certain level in order to help limit your liability on wayward trades.
Furthermore, all spread betting companies have mobile trading platforms, allowing traders to access their accounts on the move via their mobile handsets. This enables positions to be opened and closed along with a variety of account management functions, making it possible to fully engage with the markets on the move.
Spread betting’s popularity is forecast to rise over the coming years as continued marketing from the brokers and an ever-increasing profile brings the medium to more traders worldwide. While it is unlikely that spread betting will ever become the mainstay of trading business, it is nevertheless a highly useful and flexible tool for any trader to have access to.