Spreadbetting for the Daytrader

Spreadbetting for the Daytrader

Unlike fixed odds gambling, day trading futures with spread betting allows the trader to bet a stake that will represent their profit or loss multiplied by each point of the market movement. For example, if a trader believes the market will go up, and buys into the trade at $1 a point, and the market rises by 6 points, the trader will have made a profit of $1 x 6 points = $12. Another trader, buying into the market at the same time but at $20 a point, would make a profit of $20 x 6 points = $120.

Of course, the downside to this is that losses are also multiples of the initial stake. A third trader may have thought the market was going to fall, so chooses to sell rather than buy for $10 a point. The market instead goes up by 6 points, and this trader loses $10 x 6 = $60.

This is a factor of online financial spread trading that cannot be stressed enough. Markets are often volatile, and can go up or down hundreds of points over relatively short periods of time. A single trade at a high stake that sees the market swing in the opposite direction to that which the trader anticipated means that the investor can lose substantially more than their initial investment.

Leave a Reply

Your email address will not be published. Required fields are marked *