Trading or Gambling?

If you are in any doubt as to what financial spread betting is, explaining a few points here may allow you to understand it all a little clearer.

Firstly, spread betting, or spread trading as it is also known, is how it sounds. If you take the word ‘betting’ you may be forgiven for thinking that it is some form of gambling, and in parts you’d be right, however the ‘betting’ and ‘gambling’ terms should be regarded loosely as they only refer to the ‘risk’ that you are taking.

Financial spread betting is regulated by the Financial Services Authority and not the Gambling Commission, hence the fact that when your winnings come flowing in, you avoid the taxes that are imposed on other types of gambling. Spread betting is a lot more flexible than ordinary gambling; if you decide to wager your money on the specific outcome of an event you are limiting yourself to that result alone, the terms of spread betting allow you to predict whether or not the outcome will be higher or lower than the result.

For example:
•    Choose a company you would like to have a spread bet on.
•    Do your homework, this is very important as it will enable you to assess every aspect of their movements, good and bad.
•    Read the news and keep abreast of all current information, from this you will get a good idea of whether or not the future for this company will be positive or negative.
•    As soon as you feel the time is right, make your decision as to whether or not their share prices, profits and losses will be higher or lower than the previous day.

Instead of risking that their share prices will be a certain amount, you will be betting on the increase or decrease, therefore you are ‘spreading out’ your forecast.