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Whether you’re a financial whizzkid or know nothing or very little about stocks and shares, learning about the latest phenomenon in the world of finance could not be any simpler. Perhaps you’re completely oblivious to the words ‘spread betting’ or perhaps you’ve heard the term but have no idea what it’s all about?

It can be difficult to explain the variances of spread betting but most index spread betting doesn’t take place on the stock market itself but on the futures contract. Futures provide a ready-made market that remains constant for everyone around the industry but also is very fast at pricing that market.

The confidence that comes with being able to quote a price direct from the exchange helps to make the spread betting industry a stable proposition to investors. Also, this provides the spread betting firms with a means of hedging allowing them to trade the futures contract for their own account even though their liabilities move beyond acceptable limits.

The big difference between spread betting on UK and non-UK shares is the way that the price is quoted. What happens is that every penny a UK share price moves, you win or lose your selected bet size, presented in Pounds Sterling (£), or Euros (€) if you reside in Ireland.

However, the price on US and some European shares are quoted in US dollars (US $) or Euros (€) but, and here’s the difference, for each cent movement you make or lose the £ amount you chose to bet.

European countries that do not use the Euro will have stocks quoted in their applicable currency, for instance, Swiss shares are on the board shown as Swiss francs (CHF).

What are the main benefits of spread betting? Well, the most obvious one is that because you are placing a ‘bet’ and not purchasing a share the authorities treat it like a bet which means all your gains will be tax free!

You don’t need a broker; it’s optional with spread betting. Some people like to go through brokers in the same way they do with investments in shares but you don’t have to. The only cost you incur is the spread itself.

How about this for a spread betting dream? If you backed the right horse you should have cleaned up on sterling last week as once again UK officials managed to put the slide on the ever sinking Sterling. The Pound shattered the 7-year low against the Dollar and managed to hit an all-time low against the Yen.

The economic package announced by German Chancellor Angela Merkel will have forex traders trying to predict whether this action will strengthen or weaken the Euro? Should a fall occur, where will it stop? The pound’s descent into oblivion could be mirrored by the Euro.

Forex traders must have been wondering whether the pound was ever going to stop falling as it plummeted towards record lows recently. Not for twenty three years have we seen the pound at such a weak point in relation to other currencies.

Barclays Bank’s share price halved last week which was good news for those spread betting on that scenario. The bank decided to rush out a statement last week declaring its profits to be “well ahead” of expectations only to find its shares in a dire position anyway.

People are different and have varying modus operandi when it comes to spread betting and forex market trading, but what are the main strategies punters employ?

Well, several spread betters choose to bet frequently and receive small profits with the anticipation that all of the winnings combined will make for sound returns. The important thing to remember when betting like this is to have tight stop levels. Of course this is a risky strategy to employ, because four or five winning trades can be nullified by one loss. You need nerves of steel to bet this way.