How to spread bet

Spread betting allows you to predict how a market will move by betting on it to go up or down. This guide explains how to spread bet and discusses the pros and cons of doing so.
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Updated: Oct 12, 2022
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Use this page to make your first bet with help from a step-by-step investment guide to spread betting and learn what makes it different from any other form of trading. If you aren’t familiar with what spread betting is, or how it works, then it’s best to start by taking a look through our spread betting definition first before reading on.

Compare the best spread betting platforms

To start spread betting you need to find a broker that offers it. The platforms below all do so and they are some of the best options around. You can sign up straight away by following the links in the table.

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CySEC, FCA
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2
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Payment Methods:
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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

How to spread bet – a step-by-step guide

Spread betting is a relatively simple trading style and it’s easy to get started. The steps below are a guide to making your first bet.

  1. Choose a broker and set up an account. You first need to find a broker that offers spread betting. Either use the table above, or read our in-depth reviews to compare the features on offer in more detail. Then create an account in order to get started; you’ll have to provide a few contact details and a form of ID to do so.
  2. Set a budget. It only takes a small amount of money to start spread betting, as you can make bets that are worth just a few pounds. It’s still a good idea to decide how much money you’re willing to risk in advance, however, so that you aren’t tempted to put more in to chase losses if things start to go wrong.
  3. Plan a trading strategy. Most spread bettors use a fixed set of rules to guide their decisions. Often based on technical analysis of price charts, they pick out trends that help them to predict which way the price is likely to move. Using technical indicators, rather than relying on gut instinct, is a good way to be successful in the long run.
  4. Choose the asset you want to trade. You can spread bet on a range of different markets, such as commodities, forex, indices, and stocks. Once you’ve chosen what you want to bet on, take some time to research the market so that you understand the factors that affect it and can react to them accordingly.
  5. Set a stake. With spread betting, you make money based on your stake multiplied by how many points the price moves in a particular direction. This works both ways: you lose money in the same way if the price goes against you, so it’s best to start with a small stake, especially if the market is a volatile one.
  6. Open the position. All that’s left is to decide whether to buy or sell and to enter your stake amount. You can also add some limit orders, which are instructions to automatically close the position if the price hits a certain level. It’s a good idea to set them to minimise the risk from sudden market moves. Then execute the trade, at which point it will show up in the ‘open positions’ part of your account.

What is spread betting?

It’s a form of trading that lets you speculate on how an asset is going to perform. You simply place a bet on whether it’s going to rise or fall in price and earn money based on the value of your stake.

When you spread bet, you don’t ever take ownership of the underlying asset itself. It’s simply a means of speculation that opens up more trading opportunities, such as the ability to use leverage and go ‘short’. In this respect, it’s very similar to CFD trading.

Key factors to consider

Before you start placing any bets yourself, there are some important features that it’s worth considering first. Spread betting is different from simply buying a stock, for example, and so there are different factors to think about. Here is a quick summary of the most significant ones.

Whether you want to go long or short

Spread betting gives you the chance to predict that a market is going to move down, as well as up. You can buy or sell (referred to as going ‘long’ and ‘short’, respectively) an asset, depending on how you expect its price to change.

Many traders choose to use both methods in concert, as part of a day-trading strategy that involves making lots of trades every day. By using technical analysis to identify patterns, they buy and sell regularly in response to their research, with the aim of making a small profit on each bet.

The spread

When it comes to buying or selling an asset through your broker, you will find that there’s a difference between the two prices. That difference is known as the ‘spread’. The prices are also likely to be a bit above (or below, in the case of the sell price) the market rate. 

Most spread betting is commission-free, but the difference between the market rate and the buy or sell price is how the broker makes its money. It’s usually a substantially smaller amount than you would pay in fees for any other form of trading, but you should still look for a broker with a narrow spread in order to get the best value.

Whether you want to use leverage

Spread betting gives you the option to multiply the value of your bets many times over using leverage. With leverage, you put some money down as a deposit (known as the ‘margin’) and then borrow money from your broker in order to make up the full value of your bet. The returns you make are based on the full value, rather than just the deposit.

Leverage is very common in spread betting, as it allows you to make bigger bets than you would be able to afford if you simply wanted to buy the asset itself, and it means you can spread your money across more of them. It is, however, quite risky, as any losses you make are based on the full trade value as well, and you should be wary of using it as a beginner.

Spread betting is tax-free

One of the major benefits of spread betting compared to any other form of trading, including CFDs in particular, is that you don’t have to pay tax on the money you make. The key is in the name: it’s classified as betting rather than trading or investing, so any profits you make are yours to keep.

Why spread bet?

It’s a cheaper form of trading than buying and holding, and it’s considerably more flexible as well. There are lots of ways to take advantage of price changes by spread betting, most notably the fact that you can sell an asset as well as buy it.

Spread betting offers the opportunity to trade on the margin using leverage, so that you can access even the most expensive of stocks regardless of your budget. It also suits an active trading style, as there are no trading fees and you can open and close positions very easily.

Finally, there’s the fact that there are no taxes to pay on the money you make. This is in contrast to CFD trading, or buying and holding shares, for example, where UK laws charge a capital gains tax on profits above £12,300.

Still undecided?

To help you decide if spread betting is the right approach for you, here is a quick summary of its pros and cons.

Pros

  • Spread betting is usually commission and tax-free
  • It’s simple to get started with a small amount of money
  • Spread betting is available on a range of different markets
  • You can predict that an asset is going to rise or fall in value

Cons

Where can I learn more?

Here at Invezz we have all the information you might need. It could be a good idea to compare spread betting to CFD trading in order to decide which one suits you best. Or you can simply use our courses to learn more about the basics of investing:

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Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >

James Knight
Editor of Education
James is a lead content editor for Invezz. He's an avid trader and golfer, who spends an inordinate amount of time watching Leicester City and the… read more.