Spread Betting vs Traditional Trading by The Spread Bettor

LONDON, April 13, 2012 /PRNewswire/ --

Those new to spread betting often ask me why I choose to spread bet over more traditional forms of trading. The answer is always simple.

Spread betting with City Index allows me to trade on the future price movements of over 12,000 financial markets, including indices, shares, currencies, commodities and more - a level of access I would not be offered through more traditional forms of trading.

Whilst the above is a significant attraction to me and my fellow spread bettors, it doesn't stop there.

Let us look first at the key features of spread betting.

Tax-Free Profits*

Profits made through a City Index spread betting account are free from both Stamp Duty and Capital Gains Tax, at present in the UK.

As a result, I am automatically saved a large percentage of my profits; a percentage that through traditional forms of trading, I'd be required to pay.

However, remember that tax laws are subject to change and depend on individual circumstances - seek independent advice if necessary.

Margin

Spread betting's low margin feature requires me to initially deposit typically between 1% and 10% of the total value of my position, depending on the market I choose to trade.

When compared to traditional trading, the potential for profits and losses as a return of initial capital outlay is significantly higher.    

However, it is important to remember that losses can exceed the initial outlay.

Profit from A Falling Market

Compared to traditional trading, spread betting enables me to gain exposure to price movements in a market that is both rising and falling.

For example, having completed extensive analysis of my chosen market, I will decide whether I believe it will rise or fall.

If I believe it will rise, I choose to go long and buy. My profits will then rise in line with any increase in that price, on the basis I was correct and the market's price does in fact rise.

However, I may be wrong and the market's price falls instead, moving against my position. In this case, my losses will increase in line with any fall in that price.

Alternatively, say I have analysed my market and I believe that its price will fall. I'll choose to go short and sell, meaning my profits will rise in line with any fall in that market's price.

Once again, if I am wrong and the market does in fact rise, moving against my position; then my losses will increase with any rise in that market's price.

Spread betting is one of the few forms of trading that enables me and my fellow spread bettors to profit from falling market prices.

Summary

Retail spread betting offers multiple features over more traditional forms of trading. Those choosing to spread bet can benefit from tax free profits, a low margin feature and exposure to over 12,000 financial markets.

*UK tax laws are subject to change and may differ depending on your personal circumstances. Please seek independent advice if necessary.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.

SOURCE City Index

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