FAQ - What Is Financial Spread Betting

by : Holly Franklin

Financial spread betting works using the world markets such as the FTSE 100, Dow Jones and the Hang Seng and how it will react in a given day. It is easier to explain financial spread betting by example. On any given day you can find out on the web or by placing a call to a spread betting firm to find the "spread" on the FTSE 100. They will give a spread such 6350-6500 (6500 to place a "buy" or "up" bet and 6350 for a "sell" or "down" bet).

If you believe that the FTSE 100 will rise, you then place an "up" bet. You would bet a certain amount per point. For example you could bet 10 GBP per point. If the FTSE 100 rose to 6700 within the period specified by the betting firm (usually one trading day) this would be a raise of 200 points. This would mean that you would earn 10GBP x 200 points which would mean a net profit of 2,000 GBP.

If you were to feel that the market was going to fall then you would place a "down" bet. If we use the same example of 10 BPB per point if the FTSE were to fall to 6200 which would be a fall of 150 points your profit would be 10 GBP x 150 points which equates to a 1,500 GBP net profit. If the FTSE 100 were to rise however to 6500 you would lose 1,500 GBP.

By betting on the financial spreads in markets it offers an easy way for individuals to bet on the movement of the market. This type of bet making now opens the way for individual people to use the market other than through selling short in or investing in a hedge fund. It is more immediate and the potential profits are huge. It can now be done easily done online as there are many firms out there who are catering to this fast growing business.

It must be explained that there is potential to lose vast amounts of money very quickly in fiscal market betting. It is advised that you either practice using a company that will allow you to learn the system by practising on their site. The other way is to study the market first before dipping your toe into the financial spread gaming market. You would never bet on a horse that you had never studied the form for and the financial markets are the same.