Spread Betting or Spread Trading?

What's in a name? Hold on to your seats if you thought this would be an easy bit!

Some call it spread betting and some call it spread trading. I have no real problem with the term spread betting but I find that people get confused with sports spread betting which to me, is a very different animal. I also think that because betting has a strong connotation with gambling, it scares some most people off who would otherwise enjoy this way of playing the markets. Indeed, a number of my friends gasped in horror when I said I was spread betting but the same people were very happy at the thought of buying and selling shares.

Spread betting is simply another trading instrument for the trader to use but for the reasons above I now actually prefer to call it spread trading. Then comes the next confusion!

There is another method of trading which is called spread trading which is the practice of taking two separate positions with related instruments to profit from the narrowing or widening value of spread between the two (take a deep breath and don't worry if that went completely over your head).

Financial spread betting companies usually refer to it as spread betting because you are placing a bet as to whether a share, index or commodity will go up or down. Yes, it is a form of gambling I suppose but show me a way of trading that could not be perceived as a form of gambling. But because, in the UK, the proceeds of gambling are tax free to the punter, the Inland Revenue allow proceeds from spread betting to come under the same rules. Hence the companies that offer spread betting tend to want to keep the association with gambling - to keep the Inland Revenue happy.

So where does that leave us?

Nowhere really because both 'spread betting' and 'spread trading' relate to the same trading product in the UK! I prefer coming down slightly on the side of 'spread trading' because I believe trading, WHEN DONE PROPERLY, is actually very different to betting or gambling however for the purpose of this guide we will use the terms 'spread trading' and 'spread betting' interchangeably.

If you treated trading like gambling you would undoubtedly end up losing a great deal of money (well, I would anyway!) Trading to me is not the same as gambling IF (big IF) you use a well-designed and tested trading strategy.

The reason why the guide is called 'All You Need to Know About Financial Spread Betting' is to ensure it is not misleading to those who know about the form of spread trading I mentioned earlier.

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