How To Choose A Spread Betting Broker

May 7, 2020 (Investorideas.com Newswire) Spread betting has opened up strategies and markets that were previously reserved only for both professional and institutional investors. Indeed, the last two decades have seen it as one of the financial market's greatest innovations.

Aside from being a high-risk and high-reward method, spread betting is a tax-free way of actually speculating on the markets.

Spread Betting: What Is It?

Spread betting can be done all through one broker. It's a relatively straightforward trading method that grants traders and investors alike access to several global markets. Cryptocurrencies, options, futures, ETFs, bonds, commodities, equities, and forex are some of the things you can spread bet on.

Spread betting, like CFDs or contract for differences, is a margined product. Putting up even only a small percentage of the trade's full value will enable you to open a relatively large position. It's different to CFDs, however, when it comes to tax efficiency. Spread betting doesn't have capital gains tax (CGT), while CFDs are CGT liable.

When you already want to start spread betting, it can be daunting to find the right broker with the plethora of platforms, providers, and brands to choose from. The tips below will help you make the most informed decision.

1. Be Clear About What You're Going To Trade

It's essential to note that people trade on different products at different levels. You have to be sure about the product/products you're going to trade. Decide whether you're going to be using your account to actually short equities and hedge your shares portfolio or go on and scalp forex. Whatever course you want to follow will massively impact which broker is the right option to go with.

2. How Often You'll Be Trading

You also have to answer the question, "How often will you be trading?" Spread cost is the primary reason for thinking this one through. Spread cost won't be that important to you if you're only buying and holding equities for the medium term. It means that you're only expecting to make three to five trades each month. Focus on finding a broker that provides the best trade execution and product range instead. It makes sense since your trading won't likely be affected if you pay a point or two extra only occasionally a month.

On the other hand, the broker with the lowest possible spreads is what you want if you're going to scalp and make lots of small trades every day.

3. Requirements

The last thing you'd want to happen is to sign up for a broker having minimum requirements that will be seeing you out of the game quickly after losing the first few trades. Make sure their requirements for margin and minimum deposit, as well as their position size stipulations really suit your financial situation. For instance, high-volume traders will need significant capital with equities since these assets often require a 10% margin.

4. Price

Do due diligence and check whether or not you'll be getting the lowest spreads in whatever market/markets you're interested in. It's essential to note that some companies actually specialize in specific markets at low prices. However, to ensure that they have a presence, they, most of the time, also offer other markets at not-so-attractive prices. That said, you may get a better deal from a specific broker for spread betting forex than when going with a jack-of-all-trades-but-master-of-none firm.

5. Publicly Listed Versus Unlisted Firms

Is going with a spread betting firm that's not FCA regulated a good idea? Well, maybe, not. It's essential to note that the FCA or Financial Conduct Authority still regulates spread betting despite it being a form of gambling. Opting for brokers that are actually listed on the New York Stock Exchange or London Stock Exchange will be a better move for you. Don't forget that you're entrusting huge amounts of your hard-earned money to these firms. You even trust them with larger financial markets exposure, right? That being said, always choose a publicly listed broker.

6. Excellent Customer Service

You surely don't want to sit in the dark for several hours, losing money due to some technical glitch on the platform. Check reviews of your prospective brokers first to learn if they offer excellent customer service. Will the firm give you rapid assistance when any problems arise? Some brokers actually offer 24/7 support via the phone or online chat. Some even provide help in numerous languages.

Final Thoughts

Aside from the things above, the resources and tools that a broker offers are also worth considering. Does the firm provide useful news feeds and research materials? Do they offer easy-to-use and free-to-access charts and trading tools? All of these can help you perform spread betting successfully.

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