The new trading opportunities that spread betting opens for investors is breathtaking to say the least. It opens great possibilities in particular for former forex and share market traders and speculators who switch to financial spreads may find that there are substantial differences.
The vast range of spread betting markets makes this particular form of trading especially attractive for traders. Irrespective whether you want to bet on the Pound or the UK FTSE 100, Oil, an individual stock or practically any other type of financial instrument you will likely find a spread betting provider that will quote you a price for your chosen market. This coupled with the high leverage and the fact that you don’t have to pay tax on gains has made spread betting an irresistible proposition for most stock market traders.
More than that, unlike normal shares trading where you can only ‘buy’ an instrument, with spread betting you can also profit if you think that a particular stock or share is going to fall in value. This constitutes a revolution in trading and explain why this trading product is rapidly gaining popularity in the UK as more investors decide to take their financial future in their hands.
Why is Spread Betting Tax Free?
With financial spread betting you never actually come to hold any asset or the underlying instrument; you are simply ‘betting’ on a price change. Spread bets are in fact a contractual agreement between you and the spread trading firm to exchange the price difference of a security between the time of open and the closing of the contract. As you never own the underlying asset transactions do not incur stamp duty and there is no capital gains tax on profits.
Starting Out.
If you thinking of opening an account and start trading spread betting my only advice is to remember to start small and bet larger amounts only when you have acquired sufficient experience. The risk management is especially important with leveraged products like spread betting since gearing works both ways – it is great when the markets are moving on your side but not so good when the tide is against you since the leverage magnifies both gains and losses. This is why you should employ stop loss orders with all your trades and make use of a sensible consistent stake sizing system.
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