Spread Betting has obviously become much more than the conventional way of trading over the past decade. However, there are still several false pretensions and myths shrouding the reality on how traders actually function which leads to many traders liable, discouraged and baffled. Below are several notions to clear away the misconceptions surrounding the practice.

It is definitely not the case wherein the whole system is fixed against traders. Tough competition has presented spreads to become quite narrow to just mere basis points which in many cases, traders are forced to develop their customer service and technology. Given that the vast percentage of their revenue comes from spread betting accounts, providers have a very good reason and motivation for clients to put as many spread bets as possible and to keep trading with them on a regular basis.

Basically it isn’t really merely competition that made up the industry of spread betting becoming more transparent and customer focused at present. Under the Markets in Financial Instruments Directive (Mifid), spread betting companies were compelled to provide their best policies.

The opposition and increased volumes have permit providers to ever become more accommodating to their clients preferences and needs. For instance, GFT can deal with small and large traders and the requirement to deal is no longer needed to recognise exchanged contract sizes offering clients greater plasticity and options.

When it comes to dealing matters, it is a widely perceived misconception that companies will hedge by taking the opposition to your footstep. In reality, the ideal situation for a provider is that they will simply level trades without the need to hedge at all. For instance, if a client wishes to go long on the FTSE 100 at £10 a point and another is short the index at £10 a point the two parties offset one another therefore leaving the provider with no risk and simply a catalyst of trade.

It is important to consider that not every position especially those of larger sizes has identical and conflicting positions and the provider is likely to have a net exposure to a given market. In this case it would be very costly and impractical to hedge every trade. As an alternative IGG combined its net exposure to a market and sets a boundary that are highly reliant on the liquidity and the popularity of the security. In this case, any position that thrusts the net exposure beyond the required limit will be hedged one-for-one.

Lastly, the notion that traders are more likely to lose money than win a generous amount of profit is in fact a much debated myth. The fact the there are more winning trades than losing ones, according to statistics only about 20 % to 25 % of clients will make money in general. The only problem on hand is that winning trades are a lot smaller in size and clients run through their losses move their stops too far left and result in a quicker profit taking. Still, traders who became very successful in this sort of trade will still need to adapt and develop new strategies for trade.