Financial spread betting is a relatively new method of trading the markets. Originally only considered a 'City activity' and prior to 1999 only two companies offered spread betting. Then it steadily grew in popularity and more recently has exploded with the number of investors placing spread bets trebling in just one year. The public’s access and familiarity with computers sparked this off and the spread betting companies then really grasped the nettle around 2003 and began to rebuild and refine their websites to be more user friendly as well as providing a more comprehensive on-line service. We have also seen more and more companies offering spread betting in recent years.
Spread betting is also simple in concept so that people who have not traded the markets before can easily grasp it and trade without fear of showing themselves up by talking to an experienced trader or broker on the other end of the phone line. It is self-contained in that you can pretty much do everything from your armchair at home or your laptop when travelling.
You can open a trade in seconds with a couple of clicks of the mouse and you can close trades just as easily. You can trade in VERY small amounts until you gain confidence and all of this with no fear of a broker sniggering behind his hand because of your apparent lack of knowledge. What am I saying, of course brokers would never snigger, would they?
It doesn't stop with new traders either. I know of very experienced active traders who have traded the markets for 20 years or more who have now switched completely to spread betting.
The type of betting you are probably most familiar with is rather different from financial spread betting. In normal betting, you are taking a view on a horse race or a football game and are looking for a particular result. But in financial spread betting, the bet that you are making is not this fixed result, a single moment in time. You don't 'bet' that BP shares will hit 439p on 28 January, for example. Instead, you place a bet on whether you think a share or a market will be higher or lower in a few months than it is today.
Spread betting should be regarded simply as a way of backing your view on where the financial markets are going. Like anything else, the more you get it right the more money you make. But it is not a game. If you are wrong you will lose real money.
Spread betting was first offered by Stuart Wheeler in 1974 when IG Index opened its first market on the gold price. As with share futures, clients were able to bet on where they saw the gold price going in the future. This product took off rapidly and soon spread to the financial world. In 1985, IG Index offered its first financial spread bet on the FTSE 100 index. The rest, as they say, is history. And now you too can use spread betting to maximise your gains.
These days most spread bets are placed online although telephone dealing is still provided at most companies. Mobile trading is also becoming increasingly popular.
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