Spread Betting FAQs
InterTrader will answer all your questions on spread betting. Here you’ll find all the spread betting info you need to start trading with us. Learn what types of spread betting account we have, which trading markets are available, and how margin trading works.
Spread Betting FAQs
Though spread betting can offer investors with diverse trading styles the opportunity to benefit from their market research and chart analysis, you must remember that spread betting also involves risks. When trading on margin, losses can be enhanced just as much as gains. If, however, you implement proper money management techniques and limit margin to reasonable levels, most of these risks can be contained and longer-term gains can be generated using stable and consistent investment strategies.
Margin trading involves the use of leveraged position sizes where relatively small amounts of money can be used to fund much larger positions. For example, a trade using 10:1 leverage would enable a trader with £10 to open a position size valued at £100. In this case, the extra £90 is borrowed from the spread betting provider to enable the trader to maximise potential gains (or losses, if the position does not work as anticipated).
Providers typically make margin requirements forcing traders to have a certain amount of money available in the trading account (generally anywhere from 0.5% to 10% of the total trade size) to keep the margin trade open and active. You should remember that, while margin trading can allow traders to maximise gains through larger position sizes, losses can be equally enhanced and you will be responsible for these losses if the trade moves adversely.
The most obvious difference between a spread bet and a CFD (Contract For Difference) is the way each is viewed in terms of tax liability. When trading CFDs, traders are held accountable for taxes after capital gains are realised. This liability might lead many to believe that spread betting is always the preferable method but this is not always the case. One benefit of CFD trading is that losses can actually be written-off on your tax liabilities. This is not the case for spread bets because these trades have no tax liability. Some traders therefore prefer CFDs because they offer a higher level of liability protection.