Let’s say you know Alibaba will become even more dominant in the next few weeks or months.
Spread betting lets you invest small sums of money, in return for potentially dramatic profits. These gains are free of commissions, taxes, and stamp duty. As with CFD trading, like a trap-door this can swing in either direction.
In this guide, we’ll cover the top financial spread betting companies for speculating in 2022.
Table of Contents:
- 1. 🎲 Capital.com
- 2. 🎲 Pepperstone
- 3. 🎲 IG
- 4. 🎲 ETX Capital
- 5. 🎲 Markets.com
- Make Sure to Read Our Buying Guide 🚨
- What is Financial Spread Betting
- Trading Stocks Versus Spread Betting
- Choosing Almost Guaranteed Spread Bet Opportunities
- What are the Best Ways to Manage Spread Betting Risks
- What Does It Mean To Go ‘Long’ Or ‘Short’ In Spread Betting
- Does Spread Betting Make Money
- Is Day Trading And Spread Betting The Same Thing
Our Top Pick of Spread Betting Brokers (UK) 🎰
Considering spread betting? Before flipping the coin, when crunching your Trading Data, take time to learn your strategy and use good financial common sense.
Understanding spread betting at a glance:
- ♠️ It involves short-term trading of derivatives, and lets you speculate in favour of or against the market (going long or short).
- ♦️ You can leverage your position so only a piece of the full trade value is needed to begin.
- ♥️ Your spread size is calculated as the difference between your buying and selling price.
- 👑 And your stake is determined by ‘points of movement.’
1. Capital.com – Best Overall Spread Betting Platform UK
Capital.com is a bit of a Jack of All Trades for online trading – giving you direct access to forex markets, or an ocean of instruments through CFD or spread betting based vehicles.
This naturally means you can access thousands of markets for spread betting across most of the asset classes.
For instance, if you’re looking for tax-free capital gains opportunities through doing stock trading, Capital.com opens up nearly 2,500 stock markets. You won’t only just get companies listed on AIM and the London Stock Exchange either, but tons of global markets too.
To name a few worldwide markets you’ll be trading in, these include a broad swathe of Europe, U.S. listed companies, Canada, and Australia. And if you’re using a forex spread betting strategy, it gives you a kingly selection of currency pairs of majors, minors, and exotics. This platform is also an excellent spread betting broker for commodities.
Commodities you’ll be exposed to include everything from oil to gold and natural gas. The platform is 0% commission, which means as your broker the only trading commission you pay when executing an order is the spread itself. But there are a few final mention-worthy reasons behind why we rated Capital.com the number-one spread betting platform.
Namely, every single market gives you the option to make a buy and sell offer – which means you can make gains from bullish or bearish market changes. Also, you’re able to leverage your spread bet – which means magnifying each trade with more capital then your account balance. Which is obviously as dangerous as it is potentially lucrative; the UK caps this at 1:30 for major pairs on forex, and less for other instruments.
2. Pepperstone – Best Spread Betting Broker for Pros
While Capital.com gives you the easiest spread betting based stock trading available, Pepperstone is one of the most top-rated trading platforms for advanced traders working inside of forex, CFD, and spread betting markets.
Pepperstone suits experienced traders who already have concrete strategies and interface awareness.
For instance, this popular spread betting broker lets you trade using cTrader, MT4, and MT5 – each of these are external trading platforms that you can sync up to your Pepperstone trading account.
Each of these platforms gives you the professional industry-standard selection of sophisticated trading tools, customisable charts, and technical indicators. But as for instruments you are able to trade, Pepperstone is compatible with thousands of instruments across many asset classes. Find everything from stocks and shares, the forex, indices, natural gas, energies, and U.S. Treasuries.
And as for its fees, Pepperstone spread betting commissions vary according to the account type. As with Capital.com, on the standard account there are 0% commissions for spread bets. Every fee is batched into the spread itself. Meanwhile “Raw” accounts give you 0 spreads on the majority of markets (there is however a commission for each slide of just over £2). And funding routes are PayPal, credit or debit card, and bank transfer.
3. IG – Best Spread Betting Platform for More Markets
IG is well established as a brokerage corporation with numerous connections in the investment world.
Which means you are able to get a wide range of instruments and vehicles with a single platform – including stocks and bonds, hot index funds, Forex, CFD’s, and of course spread betting.
Your market exposure opportunities for spread betting is also immense– more than 17,000 tradable markets. Within these markets, there is strong variety, although IG gives the most access to shares, commodities, forex, and indexes. And of course, you're able to go long or short with each and every position, and also to apply leverage. Once again, the UK limits the top-end of this to 1:30 for UK retail investors in most cases.
However, if you’re a professional trader with the prerequisite account, leverage can be much greater. This currently is set at 1:222 for spread bets across commodities, indexes, and forex. IG however makes it impossible to make losses that exceed your account balance, because they have the vital feature Negative Balance Protection by default.
As for IG’s fees, once again this is another platform that is commission free. All charges are syphoned up to the spread itself, which you’ll need to track – but it’s mostly on the high-end of competitiveness compared to industry averages. For instance, stocks and indexes can be exchanged beginning from 0.1 points, forex at 0.6 points, and commodities at 0.3 points.
Finally, trading can happen directly through their proprietary platform, using the installation-free browser connection. Can also grab the mobile-first version, which works for Android and iOS. But note that the minimum account funds are to lose £250 – fund using bank transfer or debit cards
4. ETX Capital – Best Spread Betting Broker for Micro Bets
ETX has been around since 1965, as a London-headquartered spread betting broker. The service gives you exposure to a vast number of equities (over 5,000 instruments in total). Arenas include indexes, forex, stocks and bonds, and metals and energies sectors.
The key reason to consider ETX Capital is if you want to do small bids at a time – it’s possible to stake 10p per point for most major markets.
As with IG, you can protect your pockets from draining beyond the size of your account balance by using Negative Balance. However, since we last checked they only offer this for forex and CFDs – and it’s not on the table for Pro accounts, only Retail clients. So you’ll mostly need to rely on the natural lowered risk available from staking smaller amounts.
As for their fees, once again this is another platform that is commission free. Charges are amassed into one spread, which you’ll need to keep an eye on – but ETX is also rather competitive according to industry averages. For instance, trading AUD/USD and EUR/USD starts from just 0.8 and 0.6 points, with competitive spreads for spread betting indices.
In fact, spread betting on stocks in Europe and the U.S. has a spread of only 0.1%. This halves for spread betting on the FTSE 100 – which is even more industry-leading at 0.05%. Fund using bank transfer or a variety of e-wallets, the minimum account deposit is fairly small at only £100.
5. Markets.com – Best Spread Betting Broker for Beginners
Markets.com is similar to Capital.com, in that it focuses on offering online trading to beginners.
For this reason, the interface is user-friendly and free of technical jargon, accessible without installation directly through the web browser.
Nevertheless, traders need to step with the same amount of caution they would on any platform, when handling contracts for differences or spread betting – these two vehicles are what Markets.com focuses on. And keep special mind to leverage; although this is capped at UK limits, it is still very significant at 30x account funding, and these amplifiers can be roads to high instant upside as well as high instant losses.
So we recommend beginning using this platform on the free demo account where no actual money is put at risk. Which means you can play with spread betting mechanisms without staking any real money. You can also discover a selection of tutorials on the “Introduction to Trade” section of the website.
On that note, fees vary according to the market you are accessing. For instance, there is 0% commission on indexes, commodities, and forex – however all fees are weighted under the spread. For Stocks however, a hefty commission, of $10 for each slide, comes into play regardless of how much is at stake – this fee is added twice, ie. to open then and then to close the trade. Account opening is a matter of minutes, however only via MasterCard and Visa.
Top Spread Betting Brokers: Your Buying Guide 🃏
Let’s go over the top talking points on this topic. This section is useful for newbies who are still learning how spread betting works – also helpful when making a buying decision on the best spread betting broker to choose:
Firstly, What is Financial Spread Betting?
Spread betting uses derivative trading, which means investors don’t handle the underlying asset they bid on, such as stocks and bonds. Instead, spread bets speculate on changing market values for an asset across time, according to broker deals on offer for that asset.
As with the traditional stock exchange, there are two price quotes for spread betting – Buy price (bidding price) and Sell price (asking price).
The difference between these price points is called the Spread, thus the name spread-betting.
Brokers who offer this service make profits directly from the spread, which cuts out the need for commissions, which is different to most securities trading.
Investors bid if they think the price will rise enough to make it worth their time, or they ask if they think it will fall enough. Leverage is used, with the possibility to go long or short, some tax advantages, and broad access to the global markets.
- 🔥 Spread betting as you trade in either direction of the market which is tied to the fact that you do not actually own the underlying security.
- 🔥 it can be tax and commission free, but is illegal in the U.S.
- 🔥 Just as with stock trading, spread betting risks can be hedged through stop losses and take profit orders.
Example: Trading Stocks Versus Spread Betting
We can make this more concrete by giving the demonstration of trading derivatives through spreads, and the process. To begin with, let’s review stock market trading, then compare it with doing the same but in a spread bets format.
Suppose a stock market trade is made for 1000 shares in Tesco (FTSE 100: TSCO). The price rises £180 at which point we end the position, giving us a total profit of £2000, due to making 1000 x £2 profit for each share.
Please note: Those 1000 shares would have cost us £180,000, assuming they were directly purchased. In some cases, a margin could be used, in order to reduce the capital outlay. In addition, commissions were added for opening and closing the stock transaction. The £2000 is also taxable, including stamp duty.
By comparison, spread betting on Tesco with the same figures will begin with making a spread bid at £178,000. After this, you would need to set a fixed amount of commitment per “point,” which tracks the price movements. How a point is valued can differ.
Suppose that each point is equivalent to a penny in either direction. We put in a “up there” for Tesco share price £10 a point. Tesco’s value grows from £178-£180. At £10 per penny, this means 200 x £10, which is £2000.
However, although the gross profit for the two examples of £2000 are equal, the net profit differs because the second example incurs no commission for opening and closing the trade, no capital gains tax, or stamp duty for the UK, and a few other European countries.
There are, however, bid-offer spread fees which are significantly higher than spreads in different financial markets. This has to be made up for in order to make the initial investment alone back.
Another key benefit is that the initial deposit is massively lower. Inverse stock-market example, £180,000 could have been needed to open the trade. Whereas, spread betting could have been around 5%. Which means a far smaller deposit of £9,000 would be needed to enter into trade when using the spread betting vehicle.
This leveraged mechanism goes in either direction, of course, which means if the market goes in your predicted direction, returns are amplified; equally, if the market takes a downturn swing against your prediction, you will achieve magnified losses. So any amplified profits can be produced very quickly, but lost just as fast.
Here lies an advantage of stock trading over spread betting. If markets temporarily take a substantial downturn, stock market traders can simply wait out the market depression, if they think the price will eventually swing back up. In short, there’s more autonomy. However, spread bettors may ask investors to increase account deposits or even automatically close out the position.
Choosing Almost Guaranteed Spread Bet Opportunities
Arbitrage Opportunities for Spread Betting
Spread betting arbitrage investment opportunities come about when there are differences in the same financial instrument, across markets or companies. This lets traders purchase these instruments for cheaper and sell them for more – all in one go.
Arbitrage deals snoop out opportunities, from such market inefficiencies, to get no-brainer instant and guaranteed returns. Finding these points of arbitrage advantage are challenging because information is widely accessible and well-communicated, so points of inefficiency are small.
Nevertheless, spread betting arbitrage opportunities also unfolds when different companies take differing outlooks on the market when issuing their spreads.
If successful, the market-maker eats up the expense when the arbitrageur makes this spread bid between two separate companies. Once the high end of a spread set by one firm reaches underneath the low end of the other’s spread, the arbitrageur absorbs the difference, as profits.
In short, arbitration trailers purchase cheap for one company and sell at a premium to the other. Actual market conditions are relevant to how much profit is made.
There are several different kinds of arbitration, for instance for taking advantage of inefficiencies in currencies, interest rates, stocks and bonds, and other securities. Although it may seem a glance spread betting arbitrage is risk-free (guaranteed profit), there are in fact risks involved with this approach, which include transactional, liquidity, and counterparty risks.
Any slipup in the actual execution can cause substantial losses for the arbitration trader. Similarly, liquidity and counterparty points arise from market or company problems, so that transactions cannot be fulfilled.
What are the Best Ways to Manage Spread Betting Risks?
A few tools can be used in order to mitigate the problems of high leverage used in spread betting.
- 📉 Traditional stop-losses: Stop-loss orders mitigate risks by automatically shutting down the trade once the market falls below a set price point. For instance, this could be set at 1% of your total investment capital. However, execution inefficiencies can lead to the trade closing at a lower point than the trigger, particularly if a market becomes very volatile.
- 📈 Guaranteed stop-loss: this type of stop-loss guarantees that your trade will close out, at a specific price point that you set, even if markets are very volatile. For this service, you are charged an additional broker fee.
The more sophisticated way to mitigate spread betting risks is to use arbitrage, wherein two simultaneous bets are made in either direction.
What Does It Mean To Go ‘Long’ Or ‘Short’ In Spread Betting?
Going long simply means that a bid has been placed for the market value to grow across a certain time horizon. Whereas going short or “shorting” is the reverse play – making a bid that the market value will decrease.
Does Spread Betting Make Money?
Spread betting can produce dramatic profits if bids unfold as predicted. The majority of spread betters need years of trading before they develop mastery needed enough to make an effective trading system. Only a small proportion achieve success and most don’t.
Is Day Trading And Spread Betting The Same Thing?
There can be crossover, particularly if derivatives and leverage are used, and both forms of trading have results that are determined by changes in the market price (other than arbitrage spread betting, which takes advantage of executive inefficiencies).
However, day traders normally only have the positions open for a small amount of time, and not normally overnight. Both traders can use leverage which can magnify their gains and losses.