The spread-betting sector has become progressively more saturated, even though much of the competition has resulted in a much lower dealing cost, tighter spreads and innovative technology. Despite the given circumstance, now is definitely the best time to consider what constitutes an appropriate spread-betting provider.

Making the distinction

Betting on the future movement of a principal instrument is the basic function of a spread bet and unlike share trading, you can benefit from a fall and vice versa. The costs are priced in the difference between the buy and sell costs for a particular bet. Effectively, the broader the spread, the more costly it is to trade, however there are some spread betting firms that charge a minimal financing fee to their respective clients.

Spreads are generally unique from one provider to another. A lot may offer a one point spread on particular indices while other charge much more. As a prudent investor, be sure to always account for overnight fees since they can quickly grow if not monitored accordingly and spreads provided within a company will most likely to change depending on time of the day and the kind of product they want to trade.

Primary considerations

So before you even consider using spreads, novice traders should first do enough research of what company they would like to hire to manage their spread activities. Secondly they should also probe deeper especially regarding how spread betting firms interact and treat their clients. Moreover, when selecting a market, it is advisable to choose the one with a good reputation such as the Dow Jones and FTSE 100. Spread betting firms in general usually offer free demo accounts to their potential clients so that they can explore and make comparisons for themselves which company is better suited for their needs.

The second thing that needs to be considered is to institute what kind of trader you want to be known. For example, if you are an active day trader then you should opt to choose a provider that specialises in quick execution with all sorts of mobile trading tools and applications for better mobility. Moreover, if you are an emotional trader, you might favour tighter spreads over greater leverage. Regardless of whatever your style may be, all traders should contemplate and look for tight prices with a robust platform to work upon.

Idealism versus reality

The skill to trade a margin is one of the best appeals of spread-betting but the major drawback is the high probability of losing more than what you initially invested. Tools like City Index Trading Academy lets traders get started by teaching novice traders about the risks and benefits in spread betting.

A word of caution for new traders, you should approach account openings with due care because what seems too good to be true is in fact does not live up to the company’s promises. Those that offer with almost near-impossible criteria tend to have harsh conditions.

Several other key differentiators include trading hours and credit accounts are also important and luckily there are plenty of online manuals to help traders locate a provider that meets their requirements. Finally many companies offer quick mobile dealings but it does have disadvantages since the more you are given real time data about the movement of prices, the more likely you might be lured to make impulsive trading decisions.