Spread Trading Tutorial

If you are serious about spread betting and are looking to improve your trading technique then it is certainly worth considering a spread betting tutorial. These are available as either online courses for a fee or are often offered free by spread betting brokers to new members and account holders. Spread betting relies on an understanding of how markets operate and also what successful traders look for to enter their trades. For new spread traders, undertaking a spread trading tutorial can also offer a wealth of information which may well save them a lot of money in advance of risking real funds in the market.

Spread betting at a glance

  • Spread betting is a financial product that allows retail and professional investors access to the widest possible number and types of markets.
  • The spread betting company that you trade through is the market maker, the trader does not actually take ownership of any underlying product. Hence, in the UK you are not charge stamp duty on any gains.
  • The notion that you don’t actually own the product ensures spread betting platforms are able to almost instantaneously execute orders on behalf of their client.
  • Spread betting is a leveraged product, your money is able to realise you impressive gains as your earnings come in multiples of the actual change in the underlying product that you are trading.
  • This is of course where spread betting can also go spectacularly wrong. Losses can be huge, therefore we advise those that are spread betting, or are looking to go into spread betting, to enter each trade with a well thought out strategy. This also means setting a pre-determined stop loss so that losses are cut at a manageable level.

Several brokers offer good trading tutorials which cover the basics of spread betting on stocks, currencies and commodities. IG Index, for example offers a Tradesense introductory course which takes you through the basics of spread betting and also introduces the range of trading tools available and how these can help to increase the chances of success. Most brokers will also offer an educational area on their websites which will provide the a basic understanding of how to place spread bets but also more advanced spread trading tutorials on strategies and methods to trade the markets that they offer. Alongside these trading tutorials they will also provide helpful market briefings and analysis which helps traders to understand current price trends.

Spread trading tutorials are also available for those willing to pay for a comprehensive guide to trading the markets. These tutorials often cover the entire breadth of trading from the very begging of how spread betting works and how to place a bet to more advanced trading tutorials on using specific indicators to form solid trading strategies and money management. If you want to develop your trading, or feel that you may need to improve your current spread betting technique then these tutorials may offer a good way to learn how to improve your trading.

This form of trading only requires a deposit which is normally just a percentage of the total market value of the exposure – the trading instruments also allows you to go long (buy) or short (sell) with equal ease across a very wide range of markets. However, it is important to appreciate that with spread betting, as with other leveraged instruments, losses can exceed your initial deposit so it is very important that you understand how spread trading works.

In a spread betting transaction, commission takes the form of a wider spread than is available on the underlying markets.  Spread betting providers will usually take their prices direct from the underlying markets and add a fixed mark-up to the bid-offer spread.  Apart from this there is no additional commission or stamp duty so this mark-up or spread makes up the cost of dealing, with any profits being tax-free.  Normally, spreadbets are placed in pounds per point and there are no currency complications to worry about.

For spread traders, the spread constitutes the main cost of dealing.  The spread amounts to the difference between the buy and sell price.  So before you can make a gain on any spreadbet, you must first make the spread.  In which case, the tighter the spread, the sooner you are making money.

The Spread

Let’s work through the process of a spread betting trade. Every market trades on a bid/offer basis – the offer being the price you can buy at and the bid being the price at which you can sell. Let’s take Vodafone stock for instance – the quote could be £1.42/£1.43. The penny difference between these two prices could be referred to as the spread. With spread betting you bet in pounds per point movement. So if you wish to bet £100 per point on Vodafone at £1.43 this would be the equivalent of buying 10,000 shares. However, the spread betting provider will charge an extra spread, normally amounting to 0.1% on the price of the underlying. Bets are typically as low as £1 per point minimum.

Specific spread trading tutorials are also available to learn how to successfully apply technical or fundamental analysis. Learning how to analyse charts is a particularly useful trading tutorial as it is both straightforward to learn and also allows a trader to see hundreds more trading opportunities each day. The only way to develop skill in technical analysis is to learn and apply these to real time trading and most tutorial cover all of the major indicators, patterns and signals that are used daily by market professionals. The ability to analyse the markets from a technical perspective is an invaluable tool and spread trading tutorials will quickly pay for themselves once you can do this effectively.

When looking for the ideal spread trading tutorial is important to also consider which markets you are most interested in trading. For example, the particular events and technical setups which affect currencies are similar but not exactly the same as hose that affect commodities such as oil. A good trading tutorial will introduce the concept of fundamental analysis and link this to the technical side of trading. Fundamental analysis is the understanding of the large economic and financial events which underlie large market trends. For commodity traders in particular a spread trading tutorial which incorporates why and how commodity prices fluctuate will be invaluable and provide an improved insight into current and future market movements.

From a currency traders perspective, a decent spread trading tutorial will teach currency trading from both a fundamental and technical perspective. This will include an thorough explanation of price correlations between currencies and in-depth learning about why currencies move with large economic announcements, such as interest rate decisions and GDP announcements.  This knowledge is absolutely essential for all spread traders and a good trading tutorial should not simply focus on high probability setups but should also explain why some scheduled news events impact the markets as they do. A comprehensive and thorough trading tutorial will therefore introduce the basics from a trading platform perspective and also both technical and fundamental reasons for price movements. This may be a lengthy way to learn how to spread trade but it will be incredibly beneficial for those who want to become successful traders.

Whether you trade as a hobby or are looking to develop this into a full-time profession, finding a good spread trading tutorial from a reliable source will be an invaluable asset to your development as a trader. Often learning the basics are ignored in favour of jumping into the more complex and exciting mechanical trading strategies; although without a good grounding in the basics through a comprehensive trading course you may well end up trading blind and risking more than necessary.

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