Choosing a Spread Betting Company
Things You Must Check Before Choosing a Spread Betting Company
You may have decided (rightly) that spread betting is the best way to go forward with trading on the financial markets, but you have one more important step to take before you can start profiting. You must open an account with a spread betting provider. With so many of them springing up to capitalize on the popularity of spread betting, how can you choose which one to use?
The number of spread betting providers is still growing and there are new companies that emerge every once in a while. While this is good as it makes for a competitive market, you still have to do some homework. Research and compare all the pros and cons of each spread trading company and choose the one that meets all your requirements.
First of all, you don’t necessarily want to focus on finding one company. Many professional spread betters have accounts at more than one company, and use different companies for different types of financial instrument. Apart from anything else, the government guarantees should the company go broke are limited to about £85,000, so you don’t want to keep more than that of your money in any individual account. But you’ll also find that some providers give better spreads on particular markets, and having two providers (at least) will give you options and the chance for comparisons.
One of the most important factors when choosing a spread betting company is the bid-offer spread. When you shop around you will find that different providers give different spreads for the same product. Now it may seem that one or two tics is not significant, but you must consider that it applies to every bet you make and can add up over time.
Fortunately, because these companies all online it is relatively easy to find out who has the best price without having to call everyone. Make sure that you are looking at the financial instruments that you’re interested in trading, as some companies will offer a great spread, for example, on indices, but make that up by a wider spread on stocks.
There are several other factors that must be considered, as spread is not everything. Because of course minimum spreads can look impressive, but spread traders need to keep in mind that tight spreads are just one of the many considerations to take into account when choosing a spread betting provider. Also, some brokers have a habit of bragging about spreads ‘as low as’ or ‘from’ but this is no good if the spreads vary and widen during economic news releases or times of market volatility. In such cases you need to look at the typical spreads, being the spreads which are normally available.
Ideally, you’d want a provider that provides not only competitive spreads but also good execution speed, charting and technical analysis software, education and transparency. You’d also want a trading platform that has an intuitive interface that is easy to navigate and understand. The pricing must of course b competitive and transparent, with fast order processing so that there are no unnecessary delays or slippage. In fact, good executions are essential as there’s nothing more frustrating for traders than being faced with rejections or re-quotes when trying to close down trades. You should look at their trading platform, and if possible open a demo account so that you can see how it works and whether it is something that you will be comfortable using everyday. Some platforms are more easily customised than others, but once you get it set up how you like it, this doesn’t particularly matter.
Having a demo account will also allow you to research in depth the range of products that you can place a bet on, and make sure that the spread betting company covers all the markets that you intend to try.
Depending on your system of trading, you may also be interested in whether the company offers guaranteed stop losses and how much extra they will cost. There is a trend among some companies to offer them for “free”, but you must make sure you’re not paying for them somewhere else.
If you need it, check out the educational facilities and technical research that the company offers online. If you use more than one company, you may find that you are doing all your research with one, regardless of where you are finally placing your bet.
Finally, to the extent that you’re able to do so, assess the level of customer service available. Do they answer the telephone when you call and are they knowledgeable? You won’t be able to get a complete answer on this until you get in trouble, but it’s good to have an initial view on how helpful they will be.