Is Spread Betting a Good Means of Investing?

The argument as to the appropriateness of financial spread betting as a way to invest is often debated. Indeed, it is simply a form of internet gambling - isn’t it? To get improved insight of the argument, it is sensible to look at the cold facts. Spread betting is a derivatives product offered by online financial brokers. They provide a platform to anybody who wants to margin up and in essence guess on financial market fluctuations. As such, the trader never actually buys the underlying product, and may make capital from retreating markets as much as from rising ones. Spread betting is officially classed as a financial product and is only provided by brokers that are governed by the FSA. Trading is based on margin, just like CFDs trading. In most cases however, spread betting investors don’t pay CGT and frequently commission is not charged. With a comparatively small amount of capital a trader can start placing so-called ‘bets’ on a range of markets. These could include stocks, indices, commodities and currencies.

Positions opened by a spread better are never generally open for more than 24 hours - it is a speedy way to trade.Thus, assuming these basic facts, can we conclude that spread betting is officially a form of gambling? The answer is “no”. As a completely monitored activity, financial spread betting cannot be categorized as a type of sport. A spread betting company must adhere to a strict set of rules to be able to offer accounts and a place to trade.Indeed, countless people who partake in other versions of online investment, like forex, do financial spread betting as an additional means to make returns. But is it a good means of investment?

In recent times, high-risk speculation on the foreign exchange financial market has been put in the firing line by many politicians and financial analysts who argue that it can drive severe economic problems. A few have even accused derivatives trading as one of the core causes of the deep downturn of 2009. As speculative investors are able to make money out of a retreating market, commentators have drawn a conclusion that speculation may end up aggressive and out of control - thus leading to the plight of currencies such as the euro in recent times.Whoever does choose to partake in financial spread betting should acquaint themselves with the high level of risk that is involved. Foreign exchange markets can change suddenly and without warning, meaning a position that may have appeared to be winning moments ago can suddenly switch in the other direction, leaving the trader with significant losses.