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  • How to spread bet - the basics



     

    When taking a position on a market through our range of trading platforms, you’ll be offered two prices – the ‘sell’ price and the ‘buy’ price. The difference between these two prices is known as the ‘spread’.

    Tip: you go long when you expect a market to rise and go short when you expect a market to fall.

    For example, let’s say the UK 100, which is our market on the FTSE100 UK shares index, is available at a spread of 6,950/6,951, the sell/buy price.

    If you were to go long and buy this market, you would buy at 6,951.

    If you were to go short and sell this market, you would sell at 6,950.

    The difference between the buy and sell price changes with each market, but here at Finspreads we offer some of the tightest spreads in the industry, keeping your dealing costs as low as possible.

    An example of a spread bet on the UK 100

    Let’s say the Finspreads UK 100 index price is trading at 6,900/6,901.

    You’ve done some research and have concluded that the UK 100 index is possibly going to rise over the next two weeks, as you are expecting some positive economic data. So, you decide to buy at that price - 6,901 - with a stake size of £10 per point.

    Winning trade

    As you predicted, over the next two weeks, the UK 100 price rises to 6,950/6,951.

    You decide to cash in your profits and close your trade by selling your stake back at the new sell price of 6,950.

    In effect, you’ve gained 49 points in your trade which, when multiplied by your £10 stake leaves you with a tax-free* profit of £490.

    Losing trade

    Now let’s look at what would have happened if the UK 100 had fallen in price.

    Over the next two weeks, the UK 100 declines to 6,850/6,851, which puts your spread bet into what’s known as an ‘open loss’.

    You decide to cut your losses now and close your trade by selling your stake back at the new sell price of 6,850.

    This represents a 51-point loss in your trade which, when multiplied by your £10 stake, leaves you with you with a loss of £510.

    If you’d like more detailed spread betting strategies, visit our spread betting tips page.

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