Financial Betting Explained – How It Works

Financial betting, also referred to as spread betting, is essentially a tax-exempted bet wagered on the anticipated performance of a financial market or share. Examples include betting on forex, indices, shares, different types of commodities, and even bonds. The financial bettor gets to take advantage of the rise and fall of a market without having to run the actual risks associated with the ownership of shares.

What’s more, when shares are owned, the owner of those shares only ever benefits in the event of a rise in share value, whereas in the case of financial betting, a much wider spectrum of opportunities may be utilised. To illustrate, since every accurate prediction results in a profit earned, even depreciating shares become potentially profitable to the spread bettor.

Some Common Terms Explained

Bettors just starting out trying to master a new discipline are often discouraged by the sheer volume of terms used to describe the different aspects of betting within that particular discipline or market. This can be made even more daunting by the fact that many terms have more than one description.

Lucky for the newbie financial bettor, only three terms really matter when just starting out. They are: short and long trading, leverage, and margin.

Short and long trading: Short and long trading are essentially two sides of the same coin. Long trading refers to a bet being wagered on the odds of the value of the share or market increasing, and short trading refers to a spread bet placed on the likelihood of an asset or share decreasing in value.

Leverage: leverage is an important part of financial betting. An example of leverage in the world of the financial investor would be the so-called “opening of a position” on a specific share. This could be sort of share, for example Amazon shares, Facebook shares, shares owned in a bank or financial institution, etc. The cost incurred by the investor in such an instance would be equal to the full cost of the shares – and a cost as a rule settled upfront. The financial bettor, on the other hand, gets to enjoy 100% of the exposed value, but at a fraction of the cost.

Margin: a margin refers to a small deposit typically paid – as opposed to the aforementioned full price usually put up by the investor. This is also why many people refer to leveraged trading as trading on the margin.

Why Is It Called Spread Betting?

The “spread” in spread betting (or financial betting) refers to the difference between the buying price of a share and the selling price of a share.

Since the costs of the trade should also be covered somewhere along the line to avoid running at a constant loss, this too is typically factored into the buying price and selling price of the share. For this reason, bettors will always buy shares at a rate slightly higher than that of the market price, and by the same token, sell at a price slightly below that of price dictated by the market.

Many people profit from financial betting every month. Given just a bit of effort and determination, it can be a great way to make money.

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