Contracts For Differences (CFDs), Spread Betting, Equity and Financial Derivatives

Financial spread betting has been around in the UK and in Ireland for about 40 years but has experienced an impressive rise in popularity in the last decade. Not that long ago, spread betting was the preserve of City investors and hedge-fund whiz kids. But now retail investors are becoming more interested in this investment product and it has become the short term trading tool of choice for an ever-increasing base of private investors in the United Kingdom - and has started spreading into Europe now.

According to research specialist Investment Trends spread betting client numbers rose to 88,000 in November 2011 compared to 83,000 recorded in October 2010 while those trading CFDs reached 26,000, up from 25,000.

More recent findings by the researh specialist show that around 92,000 people in the United Kingdom were spread betting in 2012. About 35,000 people stopped spread betting in the United Kingdom in the year to July 2012 (compared to 32,000 in the same period of July 2011), while around 23,000 traders switched providers. The growth over the period 2009 and 2012 has been modest with just 9,000 new traders.

This rise in popularity can be attributed to several factors including the trend of retail investors wanting to have a more active role in their investment decisions, also partly driven by the failure buy-and-hold investing - a strategy we now know has decimated the portfolios of so many investors and the fact that new entrants (mainly brokerage firms and bookmakers) are helping to grow the potential markets and introducing the product to a new client base. The rise of the internet, and most recently, mobile trading, have also made spread betting more accessible.

Investors are now much more aware of spread betting and its benefits namely the tax free aspect and the potential for leveraged returns. Spread betting volumes are highly volatile. They are driven by the customers' ability and appetite to trade, with the latter in turn driven by perceived opportunities to make profits. Perceived opportunities are much higher when markets are volatile. Here are some interesting facts about the spread betting world from the Financial Times' special report on spread betting and providers' actual financial accounts -:

Back in the 1980s, spread betting used to be the exclusive preserve of plugged in City types. Not any more. Clients now are not just City workers but also people interested in current affairs - everyone's got an opinion these days. Today doctors, lawyers and growing swathes of middle England are opening spread betting accounts with the aim of profiting from moves in share prices, gold, the price of oil or even pork belly futures.

Some spread betting companies now estimate that well over half their clients are from outside the City. Just a decade ago the picture was very different. Then the lion's share of all spread betters were professional traders. Whilst most spread betters live in Dublin (Ireland) and London, spread betting is also especially popular in the cities of Croydon, Poplar, Brentford, Reading, Thames Ditton, Bletchley, Milton Keynes and Watford.

Figures from IG Index, one of the biggest spread betting companies and one of a tiny number with a stock exchange listing, indicate this growth is starting to happen. Last year IG Group reported turnover up 44 per cent for the six months to the end of November and the latest stats (March 2009) show that it has 50,000 active traders spread betting with 25,000 being regular traders who trade every month. It is also interesting to note that the average spread betting account is opened with just £1,000. In its latest market update IG stated that it has opened 61,000 new accounts in the year to the end of May 2009 - although only 44,000 clients had placed their first trade in the period which suggests that some punters never actually get round to trading or leave it a long time before placing their first spreadbet.

Cantor Index says it has had a 300 per cent growth in its client base over the past year with revenues and profits up 85 per cent over the same period. Lisa Baum at Cantor Fitzgerald Europe stated FX trades at Cantor Index almost tripled in the past two years, from 51,000 in the first half of 2008 to 135,000 in 2010.

Other spread betting companies are reporting similar growth. Spread betting is seen as a natural progression from a retail investor in the stock market which is traditionally heavily populated by men. However, some have compared spread betting akin to poker which has a wider range of participants and where nearly half of the accounts are opened by women.

There is also an industry trend with people to becoming increasingly aware of the fees they pay for financial services and at the same time there is a move to more self-directed investing with traders and investors demanding more control and involvement in decision-taking.

Volatile global trading markets are also encouraging the average person at their PC to spend hours attempting to beat the bookie and call the right direction or price of the Footsie. That is the message from Capital Spreads, the online financial spread betting firm run by London Capital Group, which was pleased to reveal that current trading is beating its wildest forecasts. Its number of punters, turnover and profits rose by more than 50% in the first half.

'You'd think the economy is booming by looking at our figures,' said chief operating officer Simon Denham. Indeed, industry insiders claim the client base for financial spread trading has expanded following the credit crisis – although it can be hard to find the real number of active spread betters, since many open multiple accounts and then drop out after losing money.

Capital Spreads' punters - the firm has nearly 33,560 clients - tend not to be high-rolling big-staking City professionals, but ordinary people who read the papers and believe they have a view on the nine major markets traded in London: oil and gold, the FTSE 100, Dow, S&P and Dax equity indices and sterling, the euro and the yen.

About a third of LCG's clients are aged 33-43 and based in London and the south-east, while slightly more than 5 per cent are aged 66 or above. A total of 90 per cent are men and on average they spend four and a quarter hours online in a single session - 'which is not quite so odd if you think of it as a gaming hobby or how long it takes to play a game of golf,' says Simon. 'Our most successful punter at the moment is a civil servant from Harrogate.' Almost 32 per cent have salaries ranging from £20,000 to £35,000, according to the company. About 56 per cent had savings of up to £20,000.

Similarly, the typical customer at ETX Capital is a male, aged between 30 and 45 years but a company spokesman stated that its client list also includes CEOs of large companies trading their individual portfolios as well as fund managers running multi-national portfolios. A report from ETX (2012) also shows that the number of 18-30 year olds clients is increasing. In the United Kingdom 18 to 30 year olds traders now make up a quarter of ETX clients up from 22% and in South Africa they account for over a fifth (21%) up from 18% last year (2011).

Joshua Raymond, Chief Market Strategist for financial spread betting provider City Index points to a different profile: 'Ten years ago, the standard spread bettor would be 45 years old, usually male and with a work background in the city' 'Today, they are slightly older at 48, still male and with a share dealing background but their backgrounds are much more diverse.' Mr Raymond continues: 'For every banker opening a spread betting account there are two engineers. For every engineer there is one chartered surveyor. For every chartered surveyor there is a taxi driver and so on and so forth.' The standard profile of a spread bettor has and will continue to change over time.

According to the Financial Times the profile of the average spread better remains white, male, middle-aged and professional. Although IG Index says that about 3,000 people open an account with them each month, spread betting is still not a mainstream activity.

Habits are also changing. Tim Howkins, chief executive of IG Index said single stock equity trading was 40 per cent of volume two years ago, but fell to 11 per cent in February 2009 and rose to 23 per cent in May 2009. 'Clients tend to go long of shares. There's a bias towards a bull equity market.' Recently (July 2009) IG said that indices accounted for 38 percent of the total revenues, currencies 35 percent, shares 18 percent and commodities and sports for the rest. The number of accounts being opened has been boosted by the interest in the stock markets generated by the huge media coverage given the financial and economic crisis. Many punters who stopped betting in the financial crisis after taking a hit have came back in early 2009 as the market started rising again. On an average week IG Group attracts about 700 UK customers. What is however interesting is that many of IG's high rollers (the likes of Mike Ashley, the retail billionaire and owner of Newcastle United Football Club who is rumoured to trade with IG Index) have reduced their trading activity (January 2010). IG is now making 'just' £2000 per client over a 6-month period which is down compared to what it was yielding during the volatility of the market crisis in 2008.

More and more investors are turning to do-it-yourself investments partly due to better accessibility of information and functionality available from execution-only brokers. Most spread betting providers offer access to UK and overseas stocks as well as stock indices, commodities and currencies. These can all be traded through one account, thereby allowing clients to diversify their portfolio across just about every asset class imaginable.

IG said says that its spreadbetters represented professional Middle England. Access to broadband and the growth of professional classes taking charge of their own financial affairs has transformed IG’s client base. Our typical client is 37, he is male. He works in a managerial or professional capacity or runs his own business. They tend to be decision makers - individuals earning more than £40,000 and are likely to hold a professional job: doctors, accountants, lawyers, IT specialists or those involved in corporate middle management or are self-employed make up the bulk of the company's client base. Just 10pc of customers are female. He absolutely doesn't work in the City. As it says here, only 2.2% are city based clients. That is as measured by people who get compliance copies sent to their compliance department. Maybe there is some under reporting in that, but I think you can say with some confidence that less than 5% of the client base is city based. Compliance rules in the banking sector make it difficult for City people to trade with us. And as I said, overwhelmingly male. In the year just ended 11% of new recruits were female. That is up from 9% the year before and 4% six years ago. So there's a progressive shift there. Most use spreadbetting as an extra tool in their investment portfolio and are equally adept at shorting or going long on a stock. Increasingly, they are also trading forex currencies, indices and commodities. Tim Howkins, Chief Executive of IG Group

According to Andrew Edwards, who is the CEO of ETX Capital, dislocation, market volatility and crisis have not put off the punters - just made them much more smarter in their decisions. This coming from a spread betting provider that originally used to cater for high net worth individuals is a strong claim. About 3 years back about three-quarters of ETX's business was still being conducted on the phone. That figure is now (April 2011) down to 35%, which still indicates the strength of the original client base of high net worth individuals.

"They may not be placing big bets, but they sure are punting cleverer", says Andrew Edwards. "Customers are trading smaller but the level of sophistication is different", Andrew says. "Five years ago, a middle-sized client might be trading a £20,000 account. Now in 2011, that mid-range customer is more likely to be trading a £4000 account. "Thankfully, there are many more spread traders today. But my point is that the level of sophistication of these £4000 players is the equivalent of those £20,000 customers five years ago. "People's views have changed. They know it is not as easy to make money as perhaps it was, and disposable incomes are less. People are more careful in what they are investing in." "Trading behaviour has changed. All that people have gone through, all that has happened in the financial markets has made customers sophisticated. They may originally just have been long equity players, but what has happened in markets has made them far more educated. Edwards note that 3 years back, 70% of trading on ETX was in single individual shares; in 2011, that figure is down to 30% as the punters take on the forex markets, oil and metals traders.

Market share

The largest company in the industry is IG Index, which is listed on the London Stock Exchange with a market value of around £1 billion. It now has over 72,000 clients worldwide, making approximately one million transactions a month - over 90% of them online.

Rival firm CMC Markets, 10 per cent owned by Goldman Sachs is thought to be the second-largest provider opening 4,000 to 6,000 accounts for private clients each month (July 2009) - although CMC being a private company it is under no obligation to publish its financial results. Two other long established competitors are Cantor Index and City Index. Cantor is part of the Cantor Fitzgerald Group, a global financial services provider, while City Index is part of IPGL, a privately owned company with a substantial shareholding in the world's leading derivatives broker ICAP. In Mid-2006 City Index acquired Finspreads so now both companies operate under the same umbrella. Capital Spreads is a more recent entrant having launched in 2003 but has been rapidly gaining market share to the extent that it has now displaced Cantor from fourth place.

In the past five years the industry has experienced rapid expansion with that started with the launch of Capital Spreads in 2003. Capital Spreads offers very competitive spreads and subsequently good value for clients and its introduction has helped bring spreads down. More recent entrants include GFT UK, which is related to US-based currency dealer Global Forex Trading and FXCM.

IG Index (SB 'inventor') - 41% in 2011 (up from 39% in 2010 and 30% in 2009)
CMC - 9%
Cityindex - 8%
Capital Spreads - 6%

Note: This survey conducted by Investment Trends was contracted by major spread betting firms including IG Index and it involved surveying almost 9,000 investors. IG dominates the market place with approximately one in every two active financial spread betting clients in the UK now holding an account with them and 39% using IG Index as their primary provider. IG globally has c 120k accounts. CMC markets claims c 76k accounts and 26m trades annually, while City Index does 1.5m trades per month. Capital Spreads claims over 29k trades per day.

However, white-label sites mean that about 49 per cent of clients also have a CityIndex account, even if they are not branded as such. According to the research report by Investment Trends the success of IG Index's trading platform, PureDeal, and its accessibility to non-professional investors, has been credited with much of IGIndex's feat in dominating the UK spread betting industry. It is also interesting to note that most investors stated that use a spread betting account as it allows them to short asset classes and also because it allows them to magnify investment returns whilst giving them access to a huge range of markets. Only 22% stated that they use spread betting to help them act as a hedge to their existing investments. Trading on indices such as the FTSE 100 is still very popular with spread betters, with about 76 per cent taking bets on indices, while 61 per cent said they bet on foreign exchange moves.

The Investment Trends survey also ranked Capital Spreads as number three in the market ranked by number of main account users (Investments Trends 2009 UK Spread Betting and CFD Report). In addition Capital Spreads achieved the highest satisfaction rating of all UK brokers in relation to spread value offered, with 89% or those surveyed responding that Capital Spreads offers either 'good' or 'very good' value.

The scale of competition can also be seen by the very tight pricing and terms across the market. In particular, the spread betting market has become increasingly competitive with more firms offering good value through tight spreads. Brokers margins are being reduced as these factors mean that revenue per trade is reduced and cost of client acquisition increases. There is less differentiation between firms and USPs are harder to find. Increasingly, therefore, it may be the top 5 firms who do well and some of the smaller firms may be weeded out.


"At present, many firms modify their internal trading and hedging decisions in response to successful clients. This could become an issue for regulators."

"Spread betting remains a niche product, with an estimated 125,000 people active in financial spread betting, which includes CFD and binary betting"

"This is out of a total of 425,000 with financial betting accounts, according to a survey by Celent, a research and consulting firms."

A recent survey by Celent showed that average growth rate of 26% 'taking revenues from £200 to £500 by 2010. Another recent survey by E*Trade found that the average customer was a 39-year-old man living in London or the south-east and employed at an executive level.

However, a survey by research specialist Investment Trends conducted in late 2009 estimated that there are only about 93,000 active spread betters (placed one trade in the past 12 months), which is fewer than one might think. And of these 93,000 spread betters, only a tenth also trade contracts for difference (derivatives contracts that work like spread bets). Spread betters also tend to open multiple accounts; in fact the survey concluded that clients opened on average 2.5 accounts each, with three-quarters trading actively with their first provider, a fifth also using a secondary provider to trade while 5% also traded with a third.

Spread betting trades increased by 134 per cent throughout 2008 while contracts for difference increased by 30 per cent, largely because of their tax benefits, the ability to short the markets and low up-front payments.

The Spread Betting Market Today!

With the ever-increasing growth in the spread trading industry, spread betting brokers are now dealing with different types of people starting from starter investors to highly active traders. For this reason, the offering has to be relatively broad to appeal to different kind of clients.

The spread betting market has also become very competitive over the last years, with an increasing number of providers offering very tight spreads which reduces broker margins meaning that revenue per trade is lower and cost of client recruitment increases accordingly. There is less differentiation between firms and unique selling propositions are harder to find - online spread betting today is no longer simply about giving clients with the access to the market and the platform to trade; it's about providing much more in the way of tools and information and education and services.

Clients are also demanding more - today clients aren't satisfied with tight spreads and the ability to act quickly on market opportunities, traders and investors today are also demanding more research, and on a bigger range of shares. Investors today want research, stock trading ideas, alerts on stocks whose price and volume are behaving unusually. And while the law doesn't allow spread betting providers to give advice, they can definitely provide trading ideas.

The general level of education and market awareness and about how things work is also quite higher than it was 5 years back. For instance, these days I hear people saying that when they're looking at a particular share, they will mention the management team: 'I like this share because the management team has past experience, and they've done this and that', or 'This guy has come to this company, he's had a lot of experience in this industry'. That's not how normal people think; that's how hedge fund managers think!

Volatility on the Decline

As the volatility in the markets subsides betting patterns are again returning to more usual levels with the average stake sizes again increasing as the markets stabilise and volatility dies down. Index markets like the Dow for instance have stopped moving some 200 points per day and the daily trading range has tightened to less than 100 points. Longer term swing trading (as opposed to day trading) is also becoming more popular once again.


"The FSA has taken steps to force the industry to take a more responsible approach to its promotions, particularly those targeting novice spread betters, by ensuring risks are not under-played at the expense of benefits such as winnings free of capital gain tax.

"Several years ago, it levied hefty fines on two established SB firms which had fallen short of these rules aimed at protecting consumers."

I find this very interesting and new spread betting firms are likely to repeat these mistakes while on the hunt for new customers. Some might already have and haven't been taken to account.

Astonishingly, approximately 90% of spread betting trades are buy positions

To buy or not to buy? Is that the question?

Astonishingly, approximately 90% of spread betting trades are "buy" positions. What could the reason for this be, as we're frequently told one of the main advantages of spread betting is that you can bet on the direction of the market, regardless of whether it's moving up or down. Some of the popular explanations include:


Speaking with professional traders, some suggested inexperience may result in the high trend to "buy" positions, possibly that novices aren't comfortable selling something they don't own. If we consider the typical demographic of spread betters as "high net worth males with previous investment experience" (Capital Spreads), it would seem to be selling spread betters short to suggest they can't grasp the concept of the market going down as well as up. Although the previous investment experience may have conditioned betters to the notion of buying only.


Do inexperienced spread betters feel that buying positions are less risky? Surely our greatest fear is for the market to gap and as recent events with Northern Rock have shown, unexpected news stories are more likely to result in share prices sharply hitting the floor, rather than dramatically rising. Hence being short a position should have less negative exposure to market gapping - so quashing this theory.


A quick poll of the major "tipping" press showed that approximately 2/3rds of tips were "buy" tips (Money Week, Investors Chronicle). This press aren't geared solely to spread betters; yet presumably this audience also takes advantage of these tips - and hence are perhaps 66% more inclined to go long.


I think the reason that most spread bets are "buy" is due to a far more fundamental personality trait. As a quick experiment, answer the following question: "What percentage of spread betters lose money?" Psychological research (Seligman) suggests that optimists are less likely to guess a probability of an occurrence correctly; whilst pessimists are more accurate - estimating closer to reality.

Alarmingly, the correct answer is about 80% of spread betters lose money.

If you guessed close to this figure, the theory would suggest that you're a pessimist; and the surmise would be that a pessimist can envisage the movement of a market in a negative direction to a greater extent than an optimist; so being more inclined to "sell" positions.

If your estimate differed wildly from the answer; or indeed if you knew the answer but continues to spread bet; it would suggest that you happily predict good news and bullish markets, hence having a tendency to go long. By the very high risk nature of spread betting, I think we can predict the vast majority of traders are optimists to believe we can make money this way, and hence the skew to "buying" positions.

Therefore, perhaps the question we ask ourselves should not be "to buy, or not to buy", but rather "to buy, or to sell?" We can at least be sure that as we ponder this decision, our glass is more likely to be half full!


The spread betting and CFDs marketplace may no longer be a man's world according to the Financial Times. Over the last few years the number of women opening derivatives accounts has risen dramatically, and is estimated to be growing at 10 per cent year on year and this is partly driven by the increased media coverage about personal finance and investing. The ratio of male to female spread betters is still heavily biased in favour of male spread traders but women now account for about 15% of all account holders - although the figure is far higher at some companies.

'There are no gender barriers' adds Sandy Jadeya Chief Technical Analyst of spread betting provider City Index 'Just over 12 years ago, the attendees at our seminars were 100 per cent male.' Christopher Beauchamp, a market analyst at IG Group notes that about 10% cent of their trading clients are female.

'Online trading platforms have removed many of the barriers to entry into spread betting and this has meant that one of the fastest expanding areas in this industry is that of the female client,' comments Alistair McCaig. He continues: 'With online dealing there is no 'old boy's network' to be concerned about and female clients do not need to worry about prejudice.

This interest is being reciprocated by the spread betting firms. Angus Campbell, head of sales at Finspreads, says female investors are a sought-after commodity and they actually appear to be outperforming their male counterparts. The FT quotes research from IG Index (December 2010) which backs the claim that women are better spread betters than men; according to IG Index, on average, female traders win twice as much or lose half as much as their male counterparts.

Women Vs Men...Who Would you Put your Money On?

A risk is most likely to be taken by men, according to a recent study conducted by Barclays Capital and Ledbury Research. However, this doesn't mean that women are incapable of taking the plunge into speculative trading, it just reflects that they are more careful and cautious in avoiding catastrophes.

The study indicates that women would make better investors, as opposed to men, who have already partially led us into the credit crunch. 'Women are more likely than men to have a greater desire for self-control', the study said. 'Women also tend to have...a great desire for financial self-control'.

The study found that men are over-confident. Although this can pay off, at times, it can also backfire too. Researcher Chun Xia, a former professor in Hong Kong, claimed that women are prone to stress quickly, more than men. As a result they tend to be more conservative in financial deals in the hope of avoiding anxiety provoking situations. Men, on the other hand, are the ones who need more discipline when it comes to money since they tend to be overly confident in their financial decisions, the study found.

The current study follows a 2005 study by Merrill Lynch, a financial management and advisory firm. It found that 35% of women held an investment too long, compared with 47% of men. More recently, in 2009, a study by the mutual fund company Vanguard involving 2.7 million personal investors revealed that during the recent financial crisis, men were more likely than women to sell shares of stocks at all-time lows, leading to bigger losses among male traders.

Biology could also be playing its part in how men and women make their decisions. Men's overconfidence could all boil down to hormonal impulses which trigger off these quick decision making moments. According to Time magazine, there is a growing sector of study called 'neuroeconomics' in which scientists are examining the links between hormonal and neurological impulses.

One such recent study by John Coates, a research fellow in neuroscience and finance at Cambridge University tested male trader's hormone responses to workplace decisions. He found that testosterone drives winning streaks and then risk taking. Men are more inclined to be confident about their decisions, albeit this doesn't mean they are more accurate, in their financial decisions while women tend to value wealth as a basis for security, as opposed to opportunity.

The so-called 'winner effect,' which has been seen in athletes during competition, also seems to apply to male traders. As the UK's Guardian explained:

This happens when two males enter a competition and their testosterone levels rise, increasing their muscle mass and the ability of the blood to carry oxygen. It also enhances their appetite for risk. Much of this testosterone stays in the system of the winner of a competition, while the loser's testosterone melts away fast; in evolutionary terms, the loser retires to the woods to lick his wounds. In the next round of competition, though, the winner already has high levels of testosterone, so he starts with an advantage, and this continues to reinforce itself.

'Steroids,' Coates explains, 'like most chemicals in your body, display what is called an inverted U-shaped response curve.' That is to say, when you have low levels of them you lack vitality, and do very poorly at mental and physical tasks. But as the levels rise you get sharper and more focuses until you reach an optimum. The key thing is this, however: 'If you keep winning, your testosterone level goes past that peak and sliding down the other side. You start doing stupid things. When that happens to animals, they go out in the open too much. They pick too many fights. They neglect parenting duties. And they patrol areas that are too large.' In short, they behave like traders on a roll; they get cocky.

LouAnn Lofton, in her book 'Warren Buffett Invests Like A Girl: And Why You Should, Too' makes arguments of why women make better investors than most men. According to LouAnn, women investors tend to trade with less frequency than men, are less prone to be overconfident; are more realistic in their goals and expectations; put in more effort in researching their investments; seek to analyse all angles and detail as well as alternative perspectives; are more likely to disregard peer pressure and tend to make decisions the same way irrespective of who's watching; learn from past mistakes and are less open to take extreme risks.

Are Women Better Than Men... At Everything?

The best client for us is the one that survives for a long time,' Angus of Finspreads says. So what exactly is it that makes women better at spread betting than men? Some say that women are more likely to admit when they're wrong and ask questions and this gives women an advantage over men. Another reason cited is that women simply possess a more considered spread betting and CFD trading mindset than men. Sandy Jadeja, Chief Technical Analyst of spread betting provider City Index, has noted that female spread bettors tend to be more thorough with their research and approach their spread betting and CFD trading platform with far greater caution than the male trading population.

Women seem to be more likely to get stressed by trading so have a greater desire for discipline or self-control. 'Women tend to be more disciplined investors, who enjoy researching trades and spend more time over their investments, and that means a longer shelf life for them and us.' says Angus Campbell of Finspreads. In particular, women in general are more likely to follow a trading strategy and are more disciplined to execute it than men. Mr Campbell adds that on the whole women tend to be more cautious investors but that this is not necessarily a hindrance. 'Spread betting is a leveraged product so it is risky but only as risky as you make it,' he says. 'Being careful about the markets you enter, using small stake sizes that fit your risk profile, and using stop losses can all reduce the risks.'

Christopher Beauchamp, a market analyst at IG Group noted that women tend to be in smaller stakes, testing the waters first as opposed to putting all their funds on a single trade. He notes 'Their longer-term trades often mean they are more successful, holding on to positions for longer, as opposed to jumping in and out of trades.'

Over the last decade there has been a marked increase in the number of women trading, says Joshua Raymond, Chief Market Strategist of spread betting and CFD trading provider City Index. 'Presently we see many more male clients than female clients,' states spread betting expert Mr. Raymond. 'However, over the last 10 years we have seen the number of women trading increasing. On average, between 2001 and 2007, we witnessed an increase of 124%, year on year, of new female traders.' 'However, for the period 2007 until early 2009, there was a sharp drop of 71% in the amount of new women traders.' Why the sudden decline? Mr. Raymond believes it could be a case of female traders being more risk-averse than their male counterparts.

'Women appear to be more risk averse than men and this might be the reason why we saw fall in the number of new women traders between 2007 and March 2009 - a time when the FTSE 100 lost 48%' says Joshua. Since then, the number of women traders joining City Index has increased again, now growing at a rate similar to before the global financial crisis hit the markets. As Joshua Raymond points out, 'this could indicate women are more strategic in their planning than men'.

Men also tend to learn by 'doing' which could disadvantage them compared to women - women are more open to research, learning about common mistakes and attending courses. Women have a number of natural characteristics that form part of a good investor; they can multi-task, they give attention to detail in their research and are often ready to take a longer term perspective of the markets.

Spread betting companies say that women trade in a more calculating, focused and careful manner than their male counterparts - they also tend to have good levels of compusure - a great attribute to possess if you are to ride out market movements. This leads into another potential contributor in the form of the old gender stereotype that, whilst men will not stop and ask for directions, women are happy to ask for help.

Simon Denham, managing director at Capital Spreads, says the fact his female clients outperform his male ones is down to the fact that men are too aggressive about their trading. Men tend to be more aggressive and try to bully the markets, sometimes opening spread betting and CFD trading positions on instruments that they do not understand - and most men tend to hate to be wrong. They are much more likely than women to refuse to cut their spread betting losses because they don't like to admit to losing money. It may be because of this that women spread bet or trade CFDs less compulsively than their male counterparts, which in turn makes them less likely to develop an addiction.

Women normally open fewer positions and stick to them. They don't tend to assume that they are able to outwit a fast moving market and are more likely to hold on to shares that are under pressure, trusting that their initial call was right. 'Women tend to not risk as much on each trade,' he says. 'This gives them more room for being wrong. And their views also tend to be longer-term which gives them more stable returns.' James Hughes, market analyst at CMC Markets, adds: 'Female spread traders, contrary to popular opinion, are also much better at removing the emotional side of trading from their decision making.' Quoting the Financial Times 'When it comes to taking profits or accepting losses, female traders are far more likely to walk away rather than trying to squeeze every pip out of a trade or blindly hope for a position to come back in their favour.' Scientifically this could be because testosterone levels are lower in female traders.

Having said that, the profile of male and female spread traders is quite similar - generally speaking, they are of about 42 years of age, with a similar first deposit size and typical trade sizes. They also tend to place the same kind of first trade stake, which is usually £3 per point on the FTSE. In this respect most traders seems to share a particular type of personality and trading style, irrespective of their gender.

Philip Brown, CEO of ProSpreads however points out that women may end up being too disciplined, in that in a general sense they are not risk-takers (in contrast to men) and you have to take risk to make a gain.

In the UK spread betting has led the investment industry in providing investors with the opportunity to trade online. Currently almost all spread betting is internet-based.

According to a report by Mintel, the market analyst, spread betting investors are predominantly white, male, affluent and under 45, which roughly tallies with the profile of other online product users - the idea that spread traders are men in their 50s with a City background will soon be just myth.

In its recently published white paper on spread betting, the Cass Business School said that this group tends to be the early adopter of all new technology applications.

Although women may not be the first to jump on to the bandwagon, they have become enthusiastic users of internet-based technology. This is particularly the area for online poker, where women now account for around 45 per cent of all players, according to the Cass paper. Statistics like this are prompting the spread betting industry to question how it too can tap into this lucrative market.

Women's preference for online gambling - such as internet poker - over other forms of gambling is partly explained by the differences between conventional and online betting.

Online gambling provides all of the complexity and skill requirements of other forms of betting but in a safe and anonymous environment.

A Cass Business School report commissioned by Finspreads notes: 'While adverts for CFDs and spreads focus on the macho, online gaming billboards have even included fluffy bunnies to appeal to the female customer.'

Fluffy bunnies aside, the point about advertising is a serious one. If spread betting companies are to increase their female customers then they need to convince more of them that this is a viable investment product. Highlighting the fact that women have a tendency to outperform men in this field is likely to be a far more sensible and effective way to entice them as investors.

Mr Denham says finding the right approach to attract female investors is the holy grail of their marketing.

'In general most of our clients hear about us through word of mouth, and roughly 60-65 per cent of our clients are men. We're not sure where to use direct marketing to target women because as a spread betting company there are rules about where we can and can't advertise.'

However he expects the number of female clients to rise. As little as three years ago women were around five per cent of his clients. Now, the figure is 40 per cent.

'As women take a greater share of take-home pay they will increasingly take more control over investments,' he says.

'So we fully expect to see a time when 50 per cent of all our client base are women.'

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