Spread Betting Tutorial
In this spread betting tutorial we plan to show you an example of a trade in practice. Although spread betting allows you to bet on a wide variety of different markets, stocks and shares are some of the most popular so this is where we will begin.
Spread Betting on Facebook Shares – Going Short with a Stop Loss
Mr H is wants to open a short position on Facebook shares as he anticipates the price is going to fall. When you bet on a price going down, this is also known as going ‘short’. He logs into his spread betting account and sees that the price is currently 2005 to sell.
Mr H clicks on this figure to open up a trade slip and the following appears:
Mr H now need to decide how much he wants to bet per point. He decides £10 a point is the maximum amount he wants to risk so he adds this into the “Size” field (highlighted above). This means that for every point the Facebook share price goes down, he will stand to make £10. If the price was to increase though, Mr H would incur a £10 loss. He therefore decided to set up a stop loss at the same time to limit any loss to £200. In this instance he would set the stop, 20 points above the price he has entered at.
Below you will find the completed slip that reflects the above bet:
Spread Betting on Facebook Shares – Going Long with a Stop Loss and Limit Order
When you go ‘long’, this means you anticipate a market’s price to rise in value. Joanna thinks Facebook shares are going to go up and she decides to buy a trade worth £20 per point at the buy price of 2009 (see figure 23.3). She completes her betting ticket the same way that Mr H did but clicks on “buy” rather than sell and £20 rather than £10 in the “Size” field. Joanna also has a higher appetite for risk and is comfortable losing £1000 on this bet. She therefore sets her stop loss 50 points away from the opening buy price. In addition, she also wants to automatically close the position if she achieves a profit of £500 which will be achieved if there is a positive 25 point movement in the price. She therefore sets up a limit order to close out if these 25 points in the eventuality of there being a 25 point increase.
The following image shows this in practice:
Spread betting is an extremely simple way to bet on the financial markets as we can see above and simply involved deciding upon the market you want to trade on, the direction in which the price is going to move, the stake per point and whether you want to use any additional features like stop losses and limit orders. When getting started it is advisable to sign up for a spread betting demo account to learn how to bet in a risk free environment.