Best Spread Betting Strategies

What Is Spread Betting?

Spread betting is a financial derivative that allows traders to speculate on assets like forex, indices, commodities, or shares without buying the assets. Instead, they are betting on whether the price will rise or fall.

Unlike stock trading or Forex trading, spread betting sites allows traders to make money even when the price of an asset falls. For example, if a trader thinks that the price of a certain asset will fall, he sells that asset, which means placing a bet that the asset will fall in price.

Similarly, buying means placing a bet that the asset will rise. And if the asset performed as you speculated, you win that trade. But if it does not, you lose the trade.

The profits or losses are calculated by multiplying the bet size by the unit of movement of the asset you bet on. The bet size is the amount of money you bet per unit of movement. The unit of movement is measured in points or pips.

All spread bets have a duration between one day and a few months, but you can also choose to close them earlier or close them later.

Top 5 Spread Betting Strategies

Successful spread betting requires a good understanding of the markets, a solid trading strategy, and discipline. Here are some strategies that can help you to earn bigger gains when spread betting.

Trading With Moving Averages

One of the most popular strategies for spread betting is to use moving averages as a signal for when to buy or sell. A moving average is simply an indication of where the market has moved on average over a certain period of time, and it can be used to identify trends in the markets.

One of the main features of this strategy is that it requires less active monitoring and can be used to place automated trades. However, it's important to remember that the markets are constantly changing, so you will need to stay up-to-date with market trends to ensure that your trades remain profitable.

Trade With the Trend

Another popular spread betting strategy is to trade with the trend. This means that you will be placing trades in the direction of a longer-term trend in the markets rather than against it.

One key advantage of this strategy is that it can help to minimize your risk exposure. By only entering trades when there is a strong directional bias in the markets, you can reduce the potential for losses.

However, it's important to remember that trend trading involves taking both long and short positions, which can lead to higher profits when the market is moving in your favor. It also requires more active monitoring and may not be suitable for traders who are looking for a more hands-off approach to trading.

Pattern Trading

This strategy involves identifying and taking advantage of repeating patterns in the markets, such as chart formations or price movements.

This type of trading can be very effective since it allows you to profit from market trends without having to predict which direction the market is going to move in next. However, it does require a lot of research and careful analysis to determine which patterns are likely to be profitable.

Another key feature of this strategy is that it typically involves holding trades for longer periods of time, so you will need a large account balance in order to avoid incurring significant losses from trade slippage.

News-Based Strategies

Many traders use news-based strategies to take advantage of market-moving events. This can be a very effective approach since it allows you to capitalize on short-term price movements that are often driven by fundamental factors.

However, remember that the markets can be very volatile around news releases, so you will need to carefully manage your risk.

This type of trading typically involves placing trades shortly before or after a major news event and then exiting the position once the market has moved in your favor.

An example of this would be buying a currency pair just before a central bank interest rate decision and then selling the pair after the announcement has been made.

Predicting Market Reversals

Another popular strategy for spread betting is to try and predict market reversals, which involves placing trades in the opposite direction of the prevailing trend. This can be particularly effective when there is a clear level of support or resistance in place since this indicates that there could be an upcoming reversal.

There are a number of different tools and indicators that you can use to help you identify market reversals, such as moving averages, Bollinger Bands, or trend lines.

Top 5 Spread Betting Tips for Beginners

Now that you know more about the different strategies and tools that can be used for spread betting, you may be wondering how you can get started. Here are our top tips for beginners:

1. LearnTrading on a Demo Before You Start Trading

Most top trading platforms will offer a demo account that allows you to practice trading with virtual funds. This can be a great way to gain some experience and build your confidence before starting out with real money.

2. Dedicate Most of the Time to Self-education

As a beginner, it's important that you spend the majority of your time learning about the markets and how to trade effectively. This will help you reduce your risk exposure and increase your chances of success over time.

3. Always Test Strategies Before Using Them

Before you start using a strategy in your live trading account, it's important that you test it first to make sure that it works as expected. This can help you avoid costly mistakes and minimize the risk of incurring any losses from trial and error.

4. Control Risk Through Risk Management

As with any other form of trading, it's crucial that you control your risk exposure when spread betting by using stop losses and managing your leverage wisely. This will help ensure that you stay in control at all times, even during periods of market volatility or sharp price movements.

5. Develop Your Trading Plan and Stick to it

Finally, one of the most important tips on how to spread bet successfully is to create a detailed trading plan and stick to it at all times. This will help you set realistic expectations, minimize your risk exposure, and increase your chances of success over the long term.

How to Start Spread Betting

There are several important steps that you'll need to follow in order to start spread betting successfully. Here is a brief guide that covers the basics:

1. Research Different Brokers and Platforms

The first step in starting out with spread betting is to research different brokers and platforms and choose one that matches your needs and experience level. Some important factors to consider include available assets, trading costs, software features, and level of customer support.

2. Sign Up for a Trading Account

Once you've found a broker that you're comfortable with, the next step is to sign up for a trading account. You may need to provide some basic personal information as well as proof of your identity before you can start trading.

3. Choose a Trading Strategy

In order to start trading effectively, it's important that you choose a trading strategy that aligns with your goals and risk tolerance. A popular strategy for beginners is to use technical analysis tools, such as moving averages.

4. Practice on a Demo Account

Once you've chosen a strategy and opened an account with your broker, the next step is to practice on a demo or "paper" account before you start trading with real money. This can help you gain some experience and confidence before trying out your strategies in the real world.

5. Stay Patient and Don't Chase Returns

Finally, one of the most important tips for successful spread betting is to stay patient and avoid chasing returns. This will help you avoid costly mistakes and ensure that you remain in control at all times, even during periods of market volatility or sharp price movements.

How to Choose a Spread Betting Platform

1. FCA Regulation

Trading with an FCA regulated ensures that your funds are safe. Being regulated by other financial regulators is a plus, but FCA regulation is a must for UK traders.

2. Low spreads and commissions

Most brokers do not have additional commissions for spread betting because they earn money from the spread they have for the assets you choose. So you should choose a broker that has low spreads.

3. Big choice of assets

A broker that has a big choice of trading assets offers more opportunities for you to take advantage of price fluctuations of different markets.

4. Demo account

A demo account allows beginners to test new strategies in real market situations without risking their money. But some brokers offer the demo accounts for free for a limited amount of time. So you should choose a broker that allows you to use the demo account for free.

5. Low bet sizes

In spread betting, traders choose how much they want to risk for a unit of price movements. Brokers usually have minimum bet sizes for different assets. As a beginner, you should not place big bet sizes, so you should choose a broker that has low bet sizes for spread betting.

6. Reliability

A broker’s reliability is determined by its execution speed and other trading conditions that determine the trading experience it offers to its users. One of the best ways to find out a broker’s reliability is to read reviews from its previous users.

7. Low leverage

It is not recommended for beginners to trade with high leverage because although it can increase their profits, it can also increase their losses. Because beginners are more likely to lose money while spread betting, they should choose a broker that has low leverage.

Is Spread Betting Regulated in the UK?

Yes. All spread betting brokers in the UK are required to be regulated by the FCA, ensuring that they meet stringent regulatory requirements and provide high-quality trading conditions to users. In particular, this includes competitive spreads, fast order execution, and a wide range of markets to choose from. When choosing a spread betting platform in the UK, it is important to look for platforms that are FCA-regulated and offer high-quality trading conditions.

Is Spread Betting Risky?

Like all forms of trading, spread betting is a high-risk investment and should be approached with caution. While there is the potential for large profits, many newbies lose money when trading spread bets due to factors like market volatility, lack of experience, and high levels of competition.

That said, the potential profits from spread betting can be extremely tempting and make it an attractive option for many investors. For this reason, it is important to carefully research the risks and benefits of spread betting before getting started.

Additionally, you should always consult with a financial advisor or tax professional when doing financial trading in order to ensure that you are abiding by all relevant laws and regulations. It also helps to start with a demo account to gain some experience and build up your skills before doing real-money trading.

Best Spread Betting Brokers

Pepperstone

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Pepperstone is an online broker which was founded in 2010 in Australia and is has 7 licenses from reputable regulators, including regulated by the FCA regulatory in the UK and ASIC in Australia. The assets of clients are held in aggregated accounts with major banks. These details show the company's reliability and ensure the security of the client's funds.

Other pros of this broker are fast order execution, low fees, and very low spreads starting from 0.0 pips. The average EURUSD spread is 0.09 pips.

Pepperstone uses the popular MetaTrader 4, MetaTrader 5, TradingView and cTrader to let its users trade CFDs on Forex, index, stocks, currency indices, commodities, and place spread bets.

Pepperstone does not have additional commissions for spread betting. There is also a demo account for beginners, but it is available for free for only one month.

FxPro

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The FxPro broker was established in Cyprus in 2006. FxPro is regulated by financial regulators such as CySEC in Cyprus, the SCB in the Bahamas, the FCA in the UK, and the FSCA in South Africa. FxPro currently serves retail and institutional clients in over 170 countries. Traders can trade more than 70 currency pairs, futures, and stocks with the FxPro broker. The company has access to stock indices, metals, and energy resources. FxPro maintains high-security standards by storing client funds in large international banks. They are secured and are not part of the broker's equity.

FxPro uses the popular MetaTrader 4, MetaTrader 5, cTrader, as well as a proprietary trading platform for spread betting, called FxPro Edge, to offer its users a great trading experience. This broker offers negative balance protection to its users.

FxPro also offers very low spreads starting from 0.1 pips and an average EURUSD spread of 0.5 pips.