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Spread Betting Glossary
Spread Betting Spread betting is a tax-free method of speculating on the future movements of many financial instruments, such as stock prices, commodity prices and indices such as the FTSE 100 or Nasdaq. Unlike traditional share ownership, you can speculate and profit from movements both upwards and downwards in prices, while never actually holding the shares. Read more...
Stop-Losses Due to the volatility of some markets, a stop-loss is recommended for many types of bets. This is a level at which the bet will be automatically closed if the market moves against you. Often these levels may be subject to some 'slippage' if the market moves particularly quickly, and it is not possible for the spread-betting company to close the position in the market. Read more...
Trailing Stops A trailing stop is a moving stop that follows the price of an instrument, ensuring that any sudden movement does not wipe out profits already made - effectively locking in profits. Read more...
Leverage Leverage is a term used for trading on 'margin' or borrowed funds. Read more...
Hedging A common use for spread betting is to hedge (offset risk) in an existing portfolio. Read more...
What are Trailing Stops?
A trailing stop is a moving stop that follows the price of an instrument, ensuring that any sudden movement does not wipe out profits already made - effectively locking in profits.
Example:
You think that a rising Oil price will bolster the profits of BP over the coming months, and hence increase the share price.
In July, you place a 'buy' bet on BP.L to end in September (you can cash the bet in at any time up till the end of September). The current share level is 590 pence.
You are offered the following price on BP.L September.
Bid: 595 pence
Sell: 585 Pence
(Generally the further away the end date of the bet, the higher spread is incurred)
You Place a buy bet at £10 a point at 595 pence.
You Place a trailing stop 20 points away from your buy price. (575 pence)
If the price was fall to 575 pence immediately, with the bid/offer at 580/570 your stop would be hit, and you would lose 595-570=25 * £10= £250
However, if the price was to raise to 670 (675/665) pence, you would be in a position to close at 665-595=70 * £10 = £700
If during this time, your trailing stop would have moved to 650 - ensuring that even a fast downward movement would not wipe out all your profits. Even if the market for BP shares crashed overnight, your guaranteed trailing stop would ensure that you profit by 650-595=45 * £10 = £450.
Introductory Offers to Kick-Start your Trading Profits
Capital Spreads offer a wide variety of bets on Financial Products which include: Indices, Shares (UK & US), Currencies (FX), Commodities (Metals, Oils & Coffee etc), Interest Rates and Bonds. You can bet on the Future, Cash (which expire at the end of each day) and Rolling Daily products.
Capital Spreads really strive to keep their spreads permanently tight to give you more room for profit - Extremely competitive and most are found to be better value than most of their competitors thus giving you more opportunity to win.
Whether you're a full time professional or just starting out, it’s all about making the most of the market.
City Index, a market leading provider of spread betting and contracts for difference (CFD) trading, will help you do that with a clear, simple service designed to help you make your investment decisions.
IG Index is Britain's leading financial spread betting firm, offering prices in a huge range of indices, currencies, commodities and options, as well as thousands of individual shares. Financial spread betting has grown exponentially in the last decade because it offers traders and investors a unique combination of flexibility, speed of execution and tax-free profits.
Cantor Index is a leading financial spread betting company. Cantor Index offers spread bets on a wide range of markets from shares and indices to bonds and commodities. It has unrivalled customer services and a state of the art online betting platform, as well as a free charting package and huge resource center.