Opening an Account and Placing a Bet
This is what you’ve been waiting patiently for while reading through the first two sections. Theory is all very well, but there comes a time when you need to turn theory into practice by actually opening a spread betting account and placing a bet. In this section we’ll do exactly that. We’ll place a first sample bet so that in the later (more advanced) chapters you’ll have a mental picture of what I’m talking about when I use terms like “trading ticket”.
What to look for in a spread betting provider? Security of funds, security of funds, security of funds, regulated within the EU with a representative office or branch in the country where you are resident, good free trading tools such as news wire and charts, direct access to the dealing desk if need be, tight (not the tightest) spreads, competitive margins (who needs 500:1 gearing), evidence the platform is robust and has 99.9% uptime (they should all have this % as standard).
Which Spread Betting Company?
As a trading author I am often asked which spread betting company I would recommend. In the ever-evolving world of spread betting there is no one-size-fits-all answer to this question, but I do have some views on the subject which might help you to choose the most suitable spread betting company for you. And it’s worth pointing out at the outset that you don’t have to pick just one. Try a few before settling on the spread betting company that you like, and maybe even keep a few (not too many) of your favourite accounts active – each for its own special purpose.
Ayondo offer a wide range of individual equity markets, they provide a very user-friendly and intuitive trading platform, and they have the best guaranteed stop orders support that I have found – which are offered free of charge on most markets.
My next favourite would be IG Index, which offers the widest range of individual equity markets that I have seen anywhere and which is one of the few spread betting companies that provides a trade-through-charts facility including the ability to visualise your open trades on charts. IG Index also has a nice mobile trading app and support for optional guaranteed stop orders.
As a longer-term position trading spread bettor, the possibility of collecting dividends on equity and index positions is important to me. At the time of writing SpreadEx promises to pay out 90% of each dividend compared with the 80%-of-dividend credit offered by most other spread betting companies.
While the majority of spread betting companies encourage you to trade via their web sites or mobile apps (for iPhone and Android), some of them provide the additional option of trading via a more feature-rich application that you download to your PC. An example of this is the Saturn Trader PC platform provided by Spread Co.
One of the other spread betting companies is City Index, which also runs under “white label” partnership brands including Barclays Financial Spread Trading. Although I experienced some “connectivity” issues with the City Index platform(s) a few years ago, and I wasn’t too keen on their daily resetting of the profit clock on open bets plus the tendency for new bets to be “referred to a trader”, I have noticed improvements in all of these areas. The web interface is attractive and intuitive for new spread bettors, and some of the partner brands will be very recognizable and reassuring.
There are several other spread betting companies from which you can choose including Spreadex and CMC Markets.
It’s very much a “horses for courses” choice depending on whether you want a wide range of markets, low financing charges, a good mobile trading app, or higher dividend payouts; or the things that they all seem to boast, which are fast execution and tight spreads.
The Times They Are a-Changin’
Spread betting companies refresh their product offerings and trading platforms periodically, so if you’ve been using the same platform for a while it may be worth taking a look at what the other companies are offering which they didn’t used to.
It has to be said, though, that when it comes to the other spread betting companies who are not updating their offerings right now (whenever you read this) the following may be true: if their platform ain’t broke, they don’t need to fix it. Even when the spread betting companies stick with their tried-and-tested trading platform for sometime without a major “upgrade”, you will find that new facilities are added on a periodic basis.
A Poor Workman Shouldn’t Blame His Tools
How do spread betting companies make money? Providers make the most money acting as dealers and laying off any sizes that could hurt the spread betting company. The thing is most people will lose even if you let them trade without charging a commission. The reasons are the usual; overleverage, inappropriate money management, unrealistic expectations and lack of understanding of the markets you are trading. Many traders blame brokers but the reality is they don’t understand what they’re doing.
My point is that while some trading strategies will work better on some trading platforms, choosing the best spread betting company is no substitute for choosing the most effective strategy. As an analogy: I’m sure that a great golfer like Tiger Woods would play better golf with a very poor set of golf clubs than would the guy who had “all the gear but no idea”.
Where to Spread Bet Obscure Equities
My own bias is towards spread betting individual equities rather than stock indices, commodities or currencies. As such, in March 2012 I conducted a cursory survey of which spread betting companies provided the best range of individual equity markets.
From the limited set of equities that I tested, it became clear to me that IG Index came out on top in the obscure equity race and that Capital Spreads came second. Other spread betting brands were not included because I considered them not even in the running on the obscure equity criterion, but it doesn’t mean that alternative spread betting brands like ETX Capital and SpreadEx are not noteworthy when other criteria are considered.
How Many Spread Betting Accounts Do You Need?
As a spread betting author it has been in my interests to run accounts with most if not all of the spread betting companies including their “white label” partner brands – so that I could compare and contrast, for your benefit and for mine.
Needless to say, this became unmanageable and possibly unnecessary when you consider the fact that many of the apparently-separate spread betting “brands” utilise the same underlying trading platform. Their offerings are therefore similar, but this doesn’t mean they are identical.
An entirely separate spread betting brand like IG, Spreadex or Spread Co will likely have a substantially different offering and will provide an alternative trading platform in the unlikely event that the LCG platform becomes unavailable for a short period of time.
What I’m saying here is that while I have rationalised my own spread betting accounts down to just a few of my favourites, there are some very good reasons for maintaining say two or three of them. Partly for platform resilience (so that you always have somewhere to trade), partly to reduce counter-party risk, and partly because different accounts may be useful for different reasons.
My own current preference would be to use Ayondo whenever possible for betting on high-priced financial instruments that necessitated guaranteed stop orders, and to use IG for betting on those obscure equities that are simply not offered for trading on any other spread betting platform. I might throw either of Spread Co or SpreadEx into the mix for one of their unique features and to add a third choice of trading platform. And that’s it: just three accounts, which is the minimum that I consider to be prudent but no more than I actually need.
Alternatives to Spread Betting
Before we move on to opening a spread betting account it is worth mentioning that there are alternatives to standard spread betting, which may appeal to more experienced traders or those who aspire to be. These alternatives include fixed odds binary bets of the kind offered by Binary.com, and margin trading of the kind by SVSFX Securities.