When you look to open a new spread betting account, what do you look for? Is it the things that the spread betting companies usually shout about like tight spreads, fast execution and no re-quotes? As a day trader those things might be important to you. For long-term spread bettors, the usual selling points like tight spreads, fast execution, and no re-quotes often play a secondary role.
Before we begin, this is not an in-depth view of the workings of a spread firm. This is a guide to what is out there. The spread trading firms themselves give their own rendition of spread betting on their sites.
All I am trying to do is point you in the right direction and help those of you who believe that it is not possible to spread trade because of your Global location, i.e. not living in the UK, to get started.
There are spread firms that accept foreign clients but tax-laws are your own lookout and should be looked into. Ignorance does not cut it with the IRS or whoever else it falls to picking your pockets for your hard-earned cash.
- Spread is the difference between the buy and sell price of what ever you are wanting to trade.
- Minimum stake is exactly that, the minimum amount of money the spread firm will let place per point on your desired trade.
- Margin is the amount of money required to be in your account to place your trade and this is worked out by multiplying the margin by your actual stake. Some spread firms require you to have a minimum balance, which can be quite high in some cases. If the margin is low, you can also place larger stakes per point with a lot less money needed in your account.
- Virtual or Demo Trading. This allows you to practice trade without losing your shirt. You can open a Virtual account with most firms without ever having to open a funded account.
- Some providers allow clients from outside of the UK to spread trade. This is invaluable to those of you who do not live in the UK and who do not have the time, inclination and funds to set up offshore companies etc. This however is not a means of escaping your own countries Tax jurisdictions. It is up to you to seek this information out and work with or around your own countries tax laws.
To most traders the smallest spreads and the smallest margins are going to be the most significant criteria for opening an account with a particular spread firm. Spreads do vary, but which company is cheapest depends on the particular market you want to take a position on. The difference in spreads is more significant if you are trading actively, e.g., intra-day betting on indices and share prices, where spreads could form a significant proportion of gross gains. In this situation, it might be worthwhile open several accounts with different companies and for each bet choosing the one with the cheapest spread. If you are taking longer term positions, which in the context of spread betting I would personally define as a month or longer, the cost of the spread becomes less significant and it probably wouldn’t be worth the hassle of opening multiple accounts.
But to traders new to the game, they are going to be on the lookout primarily for Virtual Trading, Low minimum stakes and low margin.
To those of you outside of the UK then the ability to trade at all is of paramount importance and that is where you will start your search.
I do favour opening an account at Trade Nation due to the very competitive spreads and good level of customer support offered but it pays to have multiple spread betting accounts to look for the best spreads and margins. This could make sense especially if you are betting large. Each spread betting firm has its strengths and weaknesses so you have to find the one that is a best fit for your style of trading.
I started my trading career by using Finspreads and I used to recommend them but only because they used to give you an eight-week training period where you can place trades from as low as 10 pence per point. Coupled with the fact that you can open an account with them with £100, they make an excellent starting point for anyone new to trading.
Now having said all of that, I was blissfully unaware of the existence of the existence of demo platforms when I started. If I had known about it I would not have opened an account with Finspreads as quickly as I did. The 8-week training period shoots past when you are trying to learn and all it seems to do is heap pressure on you to succeed by the deadline. At least with the luxury of Virtual Trading you can take your time and learn your craft at your pace.
I currently use 2 spread firms and they are CMC Markets (formerly known as Deal4free) and Trade Nation. CMC initially got my business because of their tight spreads and margins but it came at a price and that is that you have to have a minimum of £1000 in your account (now I believe they have reduced this to £200), which is why I did not open an account with them until I could afford to.
Basically, when choosing a firm, make sure it suites your needs. There is little point in going for an account which pays interests on positions if you do not intend to deposit substantial funds. Bide your time and work up to opening an account that requires a lot of money.
Price is obviously one of the things customers are looking for but we break it down – price, product, platform, people and service. I would recommend everybody to simply phone a spread betting company. How long does it take to get an answer that you want? Are they helpful? Are they spending time with you? And that gives you an indication of how a relationship would continue further down the line.
Like anything, use what you can when you can and then shop around when you are in a better position to do so.
When evaluating a new spread betting account, the specific criteria you prioritize can vary significantly depending on your trading style—day trading versus long-term spread betting. For long-term spread bettors, the usual selling points like tight spreads, fast execution, and no re-quotes often play a secondary role. Here are some points to consider if you’re focused on longer-term positions:
1. Account Features for Long-Term Trading
- Overnight Financing Costs: One of the most critical factors for long-term spread betting. The longer you hold a position, the more these daily charges can erode your returns. Look for providers with competitive financing rates or consider strategies to minimize these costs (e.g., trading markets with lower holding fees).
- Market Range: Ensure the provider offers a broad selection of markets, particularly those suited to long-term plays. This could include global indices, commodities, and equities with strong growth or recovery potential.
- Dividend Adjustments: For equity bets, check if the provider credits or debits dividends to your account and how that aligns with your investment strategy.
2. User Experience and Support
- Platform Stability: A robust, reliable platform is essential for monitoring and managing long-term trades without disruptions.
- Ease of Use: The platform should make it easy to track your portfolio over weeks or months. Features like comprehensive charting tools for multi-timeframe analysis are beneficial.
- Customer Support: Access to responsive customer service is crucial, especially if you encounter issues with positions held over an extended period.
3. Educational and Analytical Resources
- Fundamental Data Access: For longer-term strategies, fundamental analysis often outweighs technical indicators. Check if the broker provides tools like earnings reports, news feeds, or economic calendars.
- Research Tools: Look for in-depth market insights, such as those offered by Trading Central or Investors Intelligence.
4. Transparency and Reliability
- Regulation and Trustworthiness: Long-term trading requires confidence in your provider. Choose a broker with strong regulation and a proven track record of reliability.
- Pricing Transparency: Ensure clarity on fees beyond spreads, such as withdrawal charges or premium tools.
Why the Usual Criteria Are Less Important for Long-Term Traders
- Spreads: While tighter spreads are always better, they matter less for trades where the expected move dwarfs the spread. Your focus should be on macro trends and value accumulation rather than micro-costs.
- Execution Speed: A few milliseconds of delay rarely affect positions held for weeks or months.
- No Re-Quotes: Frustrating, yes, but manageable for infrequent trading compared to someone scalping or day trading.
All I can really say is open an account and see how a platform compares. Do like for like trades at the same time and in the same amount and, at the end of say a 2 week period, see which platform performs the better.
How many spread betting accounts do you need?
You’ve been using the same spread betting account for a long time, but how do you know it’s the best one for your needs? I thought that the first spread betting account I ever used was great, as compared with the regular stockbroker share dealing account I had been used to. But now I wouldn’t touch it with a barge pole.
Not all spread betting accounts are created equal, and you might find that the one which offers the best mobile trading app is not the one that offers the specific market that you wish to trade. Or the one that offers the market you wish to trade mandates a minimum stake size that is beyond your budget. Or the one that offers both has a trading web site that is always crashing or losing its connection. If you practice more than one trading style, you might find that the best account for your longer-term position trading is not the best account for your short term day trading. While I think that more than one spread betting account is desirable, if not essential, for me the magic number is now “3” (or maybe “4”). Reducing my accounts to this number should help me to keep an eye on the main prize.
