Is spread betting the same as gambling?

When professional spread traders tell people what they do for a living, there are always the odd one or two who will say that all they do is gamble for a living. Indeed this theory seems to be backed up by the Inland Revenue who would term them ‘professional gamblers’ and the general term for spread trading being called ‘spread betting’.

Spread betting is similar to actually buying shares on the stock market, except you can actually make money when the shares decrease in value if you anticipated that would happen.  However, if you made money by trading shares on the stock market you could be open to income and capital gains tax whereas because spread betting is deemed ‘gambling’ under UK law, you will benefit from any gains being tax free.

Some people see spread betting as a way to make fast cash and as a result they place short term spread trades, such as betting on the movement of a share or stock or currency over the course of just one day, otherwise termed day trading.  Short term spread trading is actually much more of a skill than longer term trading and so many people who have gone for this option rather than longer term spread trading had their fingers burnt and quickly declared spread betting as high risk gambling.

Strictly speaking, you do not know the outcome before you decide on a spread trade so it is gambling. But unlike most gambling activities, you can increase your chances of making a profit through learning the market you are spread trading in.