Spread betting in the UK has bucked the financial trend of late. The recent economic downturn and subsequent recession has had far-reaching consequences with industries, businesses and individuals all being affected. Professional investors and financial institutions have seen the value of their investments fall whilst members of the public have faced rising interest rates and an increase in every-day living costs. Although various processes have been put in place to attempt to boost economic recovery, the impact of recent the financial crisis is far from over. Falling share prices have led to a loss in value of property, pensions and investments and will take a significant time to recover.
For those with traditional investments it may be some time before they can regain their original investment or make a return on their initial outlay. Whilst some investors took advantage of low share prices, the volatility of the stock markets and unpredictable nature of the economy means that success cannot be guaranteed. Investors in stocks and shares generally only profit when the price of the shares they own rise. Often the share price must increase considerably for them to make a significant return, particularly as they must cover the cost of buying and selling the shares in addition to any other brokerage or transaction fees.
Although profits can be made by buying and selling shares, investors must often wait until prices increase to realise a profit and are required to have significant expertise and experience to trade successfully. Spread betting offers an alternative which enables investors to make a profit regardless of whether markets are falling or rising. Rather than waiting for share prices to increase, traders can actually make a profit when share prices fall, providing they have predicted the drop successfully.
Spread betting companies offer traders the option to ‘buy’ or ‘sell’ shares depending on whether her thinks the price will increase or decrease. However, the trader isn’t buying and selling in the traditional sense and doesn’t actually acquire ownership of the shares. In spread betting the trader merely bets on the outcome and makes a profit if he predicts the outcome correctly. As the investor isn’t purchasing the shares the amount required to invest is far lower than with traditional forms of investment. In fact, the trader can decide how much to invest by stating how much he wants to bet. For example, if the trader ‘buys’ at 4.54 he can dictate how much he bets per point. If he bets £1 per point he will gain £1 for every point the share price increases by but also stands to lose £1 per point if he has predicted the outcome incorrectly and the price falls. Although traders can place spread bets on share prices, they can also place bets on commodities, indices and Forex markets as well as other alternative markets.
The unique nature of spreadbetting means that investors can gain leveraged access to the world’s markets with only minimal deposits and credit facilities. Although traders can face significant losses, they can also make considerable profits. Whilst there are professionals who trade full-time, many people are turning to spread betting in order to supplement their income and take advantage of the falling markets. Whilst we have all been hit by the decline of market values, traders using spread betting are beating the markets, recouping their losses and even making a profit despite the economic decline.