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Spread Betting Q&A

These days, I'm regularly receiving questons regarding spread betting from some of you. Since I thought some of them might be of interest to our visitors I'm publishing the answers here:

FAQs : Page 1 : Page 2 : Page 3 : Page 4 : Page 5 : Page 6 : Page 7 : Page 8 : Page 9 : Page 10 : Page 11 : Page 12 : Page 13 : Page 14
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Q.1	Is Spread Betting really tax-free?
Q.2	Is Spread Betting Gambling?
Q.3	Can you help a complete novice find the way to begin a new spread betting career...?
Q.4	What do the terms 'Short Position' and 'Long Position' mean?
Q.5	What is Shorting?
Q.6	Regarding using spread betting I was under the impression that it was a bit of a risky game in terms of being able to lose more than you put in...
Q.7	Have you ever heard any successful and rich person by spread trading?
Q.8	Can you briefly tell me what IMR and CGSL stand for?
Q.9	Do I profit for each point that the FTSE moves or every full % point?
Q.10	The FTSE futures do not expire everyday right?
Q.11	I still don't get initial margin requirement - what is it?
Q.12	How much is a comfortable 'margin' for spread betting?
Q.13	I do understand the advantage of leverage trading but could one pay in full for the shares bought...?
Q.14	Aren't the odds stacked against you?
Q.15	When you place your spread bet you must have enough in there to cover your loss?
Q.16	Will a spread betting position save me on interest charges if I were to open the same position by borrowing the money from a bank?
Q.17	About margin calls how much time do they allow before they close a position when it just dips slightly into the red?
Q.18	How does a spread betting company make its money?
Q.19	What is financing?
Q.20	Does spread betting carry a financing charge if i go long on a position?
Q.20.1	Is financing and cost of carry the same thing?
Q.21	Can you close a quarterly spread bet any time you like?
Q.22	Which are most cost effective - rollovers or next expiries?
Q.23	When you place a bet, can you keep it open indefinitely or will it be closed after a set number of days?
Q.24	What is the difference between using 'Market' stop losses instead of stops based on 'Our Quote'
Q.25	Are there any companies that allow me to use the market prices to trigger the stop and limit orders, which would then transact at the firms prices?
Q.26	My FTSE stop was hit when the underlying markets were closed!!
Q.27	A question about spread betting please. Suppose SP = 3.15p and I buy at £100 per point, the maximum I can lose is my stake + £215? And suppose SP goes to 5p and I close the bet I would get in total £185, is that correct? It seems so straightforward I must have missed something. Have I?
Q.28	I have a full time job in IT, so I have access to the web all day. My aim is to use spread betting to earn some additional income. Here are my questions that I need some advice on: Is it realistic to start with a meagre £75 / £100. Is it realistic to aim or expect to make £50 per day?
Q.30	Can you offer any suggestions as to what I should look for or avoid in a spread betting company for my first account?
Q.31	I am a poor student - primary objective is to make money!
Q.31.1	I have REALLY bad shopping habits. I buy everything I want and don’t save a penny...
Q.32	Can I buy a spread bet as a substitute to a shares holding?
Q.33	Any ideas on how best to short, for somebody like me who's never done it before (apart from spread betting)?
Q.34	What about companies which are already heavily shorted?
Q.35	Is it possible to open and close bets on FTSE/Dow indices on a daily basis and be profitable?
Q.36	Is it possible to spread bet iShares ETFs?
Q.37	What are the differences between buying stocks versus betting on them?
Q.38	Is spread trading the same as spread betting?
Q.39	What are the implications of the Markets in Financial Instruments Directive and how does this affect you?
Q.40	Could you go long and short on a stock or index at the same time and trade the waves?
Q.41	I'm new to day trading and trying to get to grips with it. Can anyone offer advice as to where to obtain the best overview as to what is occurring in the markets throughout the day. Due to limited finances I can't afford a professional news feed.
Q.42	Can I close my position at any time?
Q.43	What happens if the market gaps through my stop?
Q.43.1	My FTSE short was closed after-hours but during market hours the index had got nowhere near the stop?
Q.44	Have you ever noticed that when you have a small-cap position with them, the price to close is significantly adrift from the market price?
Q.45	How does the stop-loss thing work? I've read the website but don't get it. I mean, if you buy a stock at €1.00 and set your stop-loss at 99c, then, surely we'd all be doing it and making a killing!
Q.46	Is spreadbetting currencies more risky?
Q.47	My first spread bet is now -£151. Not liking it so far...but its a December bet anyway so a few months to go.
Q.48	I was badly hurt by the market over the last 2 weeks. But when should I sell?
Q.49	You mentioned a tactic whereby you nip losses in the bud but make the most of profits. How exactly is this implemented?
Q.51	Can you trade spread bets on Gold? If so what is the deposit needed to cover the worst adverse case scenario?
Q.52	The big plus with spreadbetting is the leverage - but it can work for or against you. So the big plus can be a minus?
Q.53	If I open a trading account with £1000 and trade 1p/point, and then move up to 50p/point (which I can through Finspreads spread bet account), won't that go some way to prolong my 'longevity' even if I hit a to-be-expected, losing streak initially?
Q.54	I notice that you recommend Capital Spreads, but how do you cope with their charts being delayed...
Q.55	Why is Level 2 useful? Do I really need it?
Q.56	Could I ask whether you know where I might find volume data feed for the indices or markets? Also would you know anything about level 2 data and whether it would help trading commodities and currencies? Finally would you know what happens in the FTSE during 7-8am and 8-9am, is it something to do with market makers setting prices?
Q.57	Could you enlighten me on the colour changes on Level 2? I can understand Blue = change up and Red = change down. But why change to Black?
Q.58	If one puts in an electronic sell or buy at best and then cancels, do you think that this information is factored into the market?
Q.59	I heard someone saying that he uses 45 indicators. Can these all be useful?
Q.60	If I buy a 'rolling' contract and leave it overnight for a few days, or a week or so, when does interest get charged, or does it at all?
Q.61	What reasons would one have for choosing a FTSE 100 Apr (say) over a FTSE 100 Year end (say) or even FTSE 100 Rolling?
Q.62	Talking of newsflow...can you point me in the direction of an article analysing the nature of newsflow in relation...
Q.63	Am I right in thinking that buying a spread in, say, the FTSE 100 is similar to a tracker...
Q.64	About the FTSE can't you simply go long at £1 a point and leave the position open - eventually its bound to go over 6000 isn't it!?
Q.65	'Mostly spreadbetting is for speculating or hedging and trackers are for investing...'
Q.66	'You DO still get the benefit of dividends.' With a FTSE Bet?
Q.67	'Certainly spreadbet charges are (generally) higher and you pay interest over time' - what interest!?
Q.68	Is it normal to open a longer term position at a price which is actually lower than the current price?
Q.69	I'm fairly new to investing and am trying to find a website that will allow me to go short on the AIM. Any ideas?
Q.70	I have noticed some shares on AIM and SMALL CAP have a very wide SPREAD (about 50%)...
Q.71	CGT changes and AIM shares
Q.72	I've noted that spread betting firms will not offer guaranteed stop losses on certain companies like RPT. Why is that?
Q.73	What is the cheapest way of holding a small cap (outside FTSE 350) share through a spreadbet for a period of at least six months but possibly up to a couple of years?
Q.74	I've asked some questions regarding small caps to some of the big guns. Here are their responses...
Q.75	I think most traders know that the 'Trend is your friend', but how many know what is a trend, how to identify that, what is the time period to be considered?
Q.76	What about the dividends you will go without? If a company awards shares over cash, does your position increase?
Q.77	As far as I can tell you get no benefit of dividends in a spreadbet. The expected dividend seems to be excluded from the quoted price altogether, and so presumably does not drop when the share goes ex-div either. Have I understood this right?
Q.78	Opened at 174 at 15 a point. Cash price at 200. So why isn't my gain showing as (200 - 174) x 15??
Q.78.1	I called to ask ‘IG work out their FTSE price differently than us'...40 points difference???!!
Q.78.2	What happens with spread bets when a rights issues occurs?
Q.79	How are the Daily FTSE and Wall Street prices calculated?
Q.80	I still don't get it - how is a FTSE/Dow Future spread bet priced?
Q.81	Why are the prices quoted by spread betting companies different from what I see on the live-feed screen?
Q.82	Why do spread betting providers use the futures and not the cash price to price the bets?
Q.83	Why do the Futures update more frequently than the Cash Index?
Q.84	Why is there a different level in the underlying? Or do they use different assets?
Q.85	I use eSignal software and follow the DJIA to place bets using Finspreads Wall Street Daily cash index which (apart from their bias) closely matches the real prices on the Dow. I want to be sure the market I'm trading in is the one I'm watching on my real-time charting software.
Q.86	I'm trying to test a system based on the FTSE but am concerned with the capability of spread bet platforms to get these filled at these exact prices. It seems like it's impossible to backtest this system accurately. For instance when the markets open above or below my long/short entry trigger, or when I try to place orders for the next day after hours and the spread bet company won't allow me to place them because they are quoting higher/lower prices based on their expectations.
Q.87	Can you provide a little more information on 'fair value' as mentioned above?
Q.88	What are Quarbs?
Q.89	Are CFDs and Spread Betting the same thing?
Q.90	Given all the tax advantages of spread betting, could you explain why institutions/hedge funds don't choose spread betting over CFDs?
Q.91	I was margin called and I ended losing my past gains. I didn't lose my money; I just lost the money I gained over the last 2 weeks so I'm happy.
Q.92	I decided to buy 50 Nikkei 225 using Capital Spreads. I had done ok so far on the FTSE, so my trading resources were at about £10,800 but soon after I made this bet suddenly my trading resources showed (4,200), which I take meant I was minus £4,200. I cannot understand this figure.
Q.93	What are the differences between the Daily Cash indices and Daily Rolling?
Q.94	I am with Finspreads as you know and when betting the FTSE100 what exactly am I trading? It seems like Finspreads' own FTSE100 and not the actual index itself. I get the impression I am betting against others betting on the FTSE!
Q.95	Will spreadbetting companies cancel your account if you are too successful?
Q.96	Do spread betting firms hedge their customers' bets?
Q.96.1	What if my spread betting provider goes bankrupt!?
Q.97	Are spread prices ever skewed?
Q.98	Do spread betting companies move the spread around to advantage themselves?
Q.99	Obviously the betting company wants my money and would love the share to start to dropping, so do they have the means to make this happen i.e. start to sell big chunks of BYG shares?
Q.99.1	What happens if everybody on earth simply spread traded – wouldn’t the markets not stop moving?
Q.100	Looks like Finspreads, smells like Finspreads, but it's called Easy2Spreadbet! (huh?)
Q.101	I would just like to know what precisely the jargon means that analyst use in terms of rating shares. e.g. Underweight, Neutral and Overweight.
Q.102	What is a Share Split?
Q.103	What is Dividend Cover?
Q.104	What is the difference between the ex dividend and record date?
Q.105	Can you tell me how to find out dates of company ex-dividend dates?
Q.106	I was wondering if you can recommend a website that emails company news by sector?
Q.106.1	Why isn’t an AIM stock with a big capitalization like Playtech not in the FTSE 250?
Q.106.2	How are stocks promoted/related in the FTSE and how does this impact on a share's price?
Q.107	What is a Placing?
Q.108	Why do buybacks work?
Q.109	Housebuilders priced below book value...isn’t that a very strong positive buy signal?
Q.110	Is it best to invest in high or low priced shares?
Q.111	How does one select which stocks to invest in?
Q.112	I'm looking for tips on how to guesstimate a target share price...?
Q.113	What does 'averaging down' mean?
Q.114	What is Capitulation?
Q.114.1	What about Bonds?
Q.115	Do you think it's better to buy when everyone is selling like today?
Q.115.1	Why do shares fall faster going DOWN and go UP slower?
Q.115.2	Is buying stocks a rip-off?
Q.116	I bought in the morning and am a bit disappointed as I did the research and felt that it was a sure fire buy and that the rewards would be a rising price early doors?!
Q.117	Add more to winning positions!!? Why????
Q.118	What is a carry trade?
Q.119	What is scalping?
Q.120	When you see a trade go through for say 12 shares or even 1 share, what is that all about?
Q.121	Bid - Offers prices - why does sometimes the offer price happen to be lower than the bid price by between 5% & 7%?
Q.122	Do interest rates affect the prices of stocks?
Q.123	What are your thoughts on free trading seminars?
Q.124	I've always thought that spread betting was a fool's game - much too risky compared to shares dealing...
Q.125	Can I use spread bets to hold out longer term positions?
Q.126	Can you recommend a book or perhaps a method of how one might develop patience (in the trading sense)?
Q.127	When making a trade, how much background research do you do? Have you got a strategy?
Q.128	What does the expression "short Sterling" mean, exactly?
Q.129	Are the financial futures markets reliable predictors of the future?
Q.130	Is it a good idea to buy more of a stock that's doing well before it gets too expensive or hang on to my cash until another opportunity arises?
Q.131	I was called by lauruscap.com re-shares in MBSM offered at $0.5 and foolishly or not I purchased them.
Q.132	If I were to sell shares and take a position through a spread bet offsetting that against my mortgage, would that be a positive thing?
Q.133	Hi, I use spreadbets to hedge my options positions, and would like to know how to use contingent orders in this respect.
Q.134	How do you hedge against market crashes?
Q.135	What about gold as a hedge in a falling market?
Q.136	About shares trading (not spread betting). When do I need to have bought a share and how long do I need to hold it for to receive the dividend payment? I presume I must buy before the Ex-Div date and hold until after the record date. BUT Do I then need to hold until the actual payment date or not?
Q.137	What are the differences between spread betting and fixed odds betting?
Q.138	Will binary betting companies limit my account if I'm winning consistently?
Q.139	What is In-Running betting?
Q.140	I'm a UK expatriate living in Spain. As an expat can I still use spread betting as a tax-advantaged trading vehicle?
Q.141	I'm located in the United States where Uncle Sam taxes everything and outlaws anything which it can't tax (like online gambling!). Is there a way for me to open a spread betting or CFD trading account?
Q.142	Do you know whether spread betting and CFD's are permissible asset classes in SIPP's?
Q.143	Why do most investors/traders lose money?
Q.144	Can a club spread bet tax free or do we have to use CFDs?
Q.145	Where do you place the stop loss?
Q.146	A lot of people stress stop losses - but if that was all there was to it surely more people would win?
Q.147	What's best using a guaranteed stop loss or ordinary?
Q.148	I have a question in relation to protecting portfolio profit...apart from the stop loss, and trailing stop loss strategy, are there any other methods for locking in profits without hurting the chance of further gains? For instance, buying puts on the XJO? Selling SPI futures? If you anticipate a market top, or is this faulty logic...should we just trade with the trend until it corrects us out by hitting our trailing stops...??
Q.149	In setting trailing stops for downside protection do you have any advice of a percentage and/or methodology that works well for them in regard to getting stopped out in a market blip? I am using 5% as a trigger.
Q.150	I went to move one of my GSLO's online after the market had closed, only to get a message on the screen that I could not move my stop closer to the market price unless the market was trading. I'm just wondering why?
Q.151	I'm confused - how are stops not a form of protection?
Q.152	What are the limitations of stop losses?
Q.152.1	'Problem is that sometimes I end up with stocks that go in the 'wrong direction' for a long time as I don't like exiting with a loss...’
Q.152.2	I like your comments about trimming your positions. One thing I ask is how do you exit in thirds on a spreadbet?
Q.153	I'm looking for a spread betting company that will hold the trade open until I choose to close it, with me incurring the daily interest to keep the trade open, but without it closing each night (Finspreads were closing my trades each night and re-opening them incurring any profit or loss for that day). I also want the ability, as per Metatrader 4, to have multiple same-direction trades open at any one time, allowing me to close these trades on an individual basis as I choose.
Q.154	Is there a company which permits me to be long and short of the same instrument at the same time, in the same account?
Q.155	A few weeks ago you mentioned RHM. Personally, I wouldn't touch RHM with a barge pole. It just doesn't feel right to me.
Q.156	I have heard mention, and read on numerous occasions, that it is not wise to over-trade. But...how does one define over-trading? Examples would be appreciated.
Q.157	Any thoughts on Oil stocks?
Q.158	A spreadbetting training company will give me a 2 day course for £2200. And a monthly subscription service of £90 a month!
Q.159	Are there any tipsters or trading publications that you recommend?
Q.160	Which are the best spreadbetting books out there to read?
Q.161	'CMC DO spike their spread to take out stops. They do this because in many cases they are not laying off your bet but taking a position against you...'
Q.162	How do CMC calculate their rolling cash prices 1.) during market hours 2.) out-of-hours for the FTSE?
Q.163	Do the bid/offer spreads offered by spread betting companies vary from company to company?
Q.163.1	Doesn’t betting on shares leave firms at the mercy of insiders?
Q.164	Is it possible to make a living from spread betting/trading?
Q.165	Do you really need to have a residual income stream or can you make a living using your capital?
Q.166	Do you know anyone good who can invest my money for me?
Q.167	Why do so many FTSE spreadbetters lose money?
Q.168	Do not trade INDICES, it’s just a lottery...
Q.169	What do you think is the biggest obstacle to a successful experience as a private trader?

Hope that answers some of your questions but feel free to send me queries, comments or concerns at traderATfinancial-spread-betting.com or by filling the form below.

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