The discussion as to the appropriateness of financial spread betting as a way to invest is often up for debate. After all, it is simply a form of online gambling – isn’t it? To achieve a better picture of the discussion, it is wise to look at the cold facts. Spread betting is a derivatives instrument offered by online financial brokers. They offer a platform to anyone who wishes to take a chance and effectively place bets on financial market fluctuations. As such, the trader never really buys the underlying product, and could make money from retreating markets just the same as from rising ones. Spread betting is officially termed as a financial product and is only provided by companies that are regulated by the FSA. Trading is dependent on margin, like CFDs trading. In the majority of cases however, spread betting investors don’t pay CGT and regularly commission is not charged. With a relatively small amount of funds an investor can start taking so-called ‘bets’ on a variety of markets. These can include shares, indices, commodities and currencies.
Bets opened by a trader are never usually open for longer than a day – it is a fast-paced means of trade.Therefore, given these elementary facts, may we assume that spread betting is truly a form of gambling? The answer is “no”. As a fully governed activity, financial spread betting cannot be categorized as a type of sport. A spread betting broker must adhere to a strict code of conduct to permitted to offer accounts and a platform for trade.In fact, countless investors who partake in other forms of online investment, such as foreign exchange, indulge in financial spread betting as an additional way to make returns. Yet is it a good way to invest?
In recent times, high-risk speculation on the foreign exchange market has been placed in the spotlight by many politicians and financial analysts who argue that it may lead to serious economic financial downturn. A few have even admonished derivatives trading as one of the core causes of the severe downturn of 2009. Because traders can make money out of a falling market, critics have drawn a conclusion that risk-taking may become aggressive and uncontrolled – thus ending in the problems of currencies like the euro in the last few months.Whoever does choose to partake in financial spread betting should acquaint themselves with the high level of risk that is involved. Foreign exchange markets can alter suddenly and unpredictably, meaning a bet that might have seemed a winner moments ago can suddenly turn in the other direction, leaving the trader with significant losses.