When it comes to spread betting, there are plenty of companies to choose from. However, it’s important to compare them before setting up an account and making your first deposit. This article will provide more details on how to do that.
Safety and Security
Checking the security record of your chosen spread betting provider may seem like a boring task, but it’s crucial for several reasons, especially if you plan to transfer large sums of cash. One important factor to consider is whether the provider segregates client funds from their own funds. This way, your funds are better protected if the firm goes bankrupt. You should also verify if the provider is regulated by a relevant authority, such as the Financial Conduct Authority in the UK. Ask for their registration number and then double-check this on the FCA’s register.
Trading Costs – Fees and Spreads
Aside from safety and regulation, it’s also important to check the fees your spread betting provider may charge. Before doing this, familiarize yourself with their business model so that you can approach the issue with an informed mindset. The term “spread” refers to the difference between the buying and selling price of an asset. Providers will deduct a pre-agreed amount from this spread as the cost of doing business. This “spread fee” can be fixed or variable, depending on the provider. Some providers charge a fixed spread, while others adjust the spread based on market moves.
And, in some cases, the provider may employ a different business model altogether by charging commissions instead.
As a spread bettor, your role is to ensure that you choose the right model – and hence provider – for your needs.
If you’re able to respond in a nimble and agile way to price fluctuations, perhaps by having lots of time and liquidity on your side, variable spreads might work for you; if you want certainty, fixed spreads will be better.
Don’t forget to check what spread fees are like at different providers, as that’s a crucial way to ensure you don’t get ripped off.
Range Of Assets
Not all spread betting providers offer the same asset classes. Some spread betting sites, for example, specialise in the provision of particular assets: if you know for a fact that you don’t want to trade forex, for example, a company which offers 100 forex pairs but very few other instruments is unlikely to meet your needs.
The asset classes you’ll go for will depend on your personal preference, time and risk tolerance. The foreign exchange market, for example, tends to only function during the week.
An asset class like cryptocurrency, on the other hand, may be available to trade all the time. It is worth noting here however, that cryptocurrency trading on margin was banned by the FCA for UK traders.
So you will need to stump up the full value to open a position on cryptos – even when spread betting.
Forex also tends to require a strong understanding of global economic forces like interest rate-setting procedures, whereas other asset classes are one step removed from macroeconomic factors.
And volatility can also change from asset class to asset class: Bitcoin, for example, is known for being much more volatile than – say – some bonds.
Speed And Platforms
Finally, it’s a good idea to take your potential provider websites for a test drive before you actually make any deposits.
Many spread betting sites offer demo accounts, which work by allowing you to sign up and “trade” without actually depositing any money.
The difference, of course, is no profits – or losses – can be made.