What is the spread?

Posted By Robert On Monday, January 20th, 2014 With 0 Comments

The spread is the difference between the bid (sell) and the ask (buy) prices. Spread betting and CFD providers are market makers and take a margin around the spread between bid (sell) and ask (buy).

When you buy shares via a traditional broker, you have to pay a fee or commission to deal. Some brokers levy a flat fee for trades. However, with spread betting and CFDs there is no dealing cost as such and the providers make their money from the difference between the bid and offer prices.

You decide how much you want to bet for each point the underlying asset (market) moves. The minimum amount you can bet per point varies according to the provider and the underlying asset (market). So for a small company Capital Spreads might have a minimum stake of £1, for a bluechip giant like apple or google though, the minimum stake would be 20p

Are there any other fees when dealing?

Aside from the spread or financing costs, there are no further charges or fees involved with trading through a spread betting/CFD or forex broker. Clients do not pay transaction fees or processing and settlement charges.

The Spread is the difference between the bid (sell) and the ask (buy) prices. Whilst the buy price is always higher than the sell price, it is important to understand that the spread will vary between markets and can change depending on market conditions. The wider the spread, the more the market will need to move in your favour before your trade will be profitable.

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