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5 Steps to Spread Betting

Step 1 Learn About Spread Betting

 Spread betting is a derivative investing method that allows you to make bets on which direction the value of the underlying instrument moves. Spread bets can be made on stocks, bonds, forex, commodities and ETFs. We wrote a short beginner’s guide to spread betting here. An important thing to know about spread betting is that it can be very risky and is often considered to be more of a tool for speculation and short term returns than an instrument for long term investors. With that said, the best way to learn about spread betting is to do your own research. Reading and studying as much as you can before you begin will help your chance of success.

Step 2 Find a Place to Spread Bet

 The next step is to find a reputable and cost effective place to make your bets. Since there are many providers out there, it is important to find one that uses good technology (fast and accurate executions) as well as provides access to all the markets and products you may consider trading. Also, since returns decline substantially with high trading costs, it’s important to find an online trading provider that offers low trading costs. Some providers like ETX even offer trading without commissions. Once you’ve found a good partner, you should get acquainted with the trading platform and tools they offer so you’ll be ready to trade when needed.

Step 3 Find an Investment

 Finding an investment is harder than you’d think. You’ll have to do some research to find something that you have some conviction in. For example, if you think the value of the Yen is going to climb versus the Pound you could trade the Yen forex. You should also look at investments that are more liquid so that the bid ask spread on the investments isn’t as high, and so you’ll be able to get in and out of the investment very quickly.

Step 4 Set Your Limits and Goals

 Once you’ve found your investment you should make your purchase and set your limits and goals. Limits are needed to stop your losses or take your gains. And goals are needed so that you know when to exit your investment.

Step 5 Monitor, Sell, Repeat

Now that you’ve invested, it’s time to watch your investment, sell if you hit your goal or a limit, and then find the next investment and repeat. Keep doing your research and learning more and hopefully your spread betting will get better and better returns.


 

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