Which Spread Betting Provider is the Best? Learn Here!

By karlvcohen on January 22, 2011 In Currency Trading

A decade or so ago, spread betting was nothing much more than a little fun sideline for the City people. With more than 20 brokers who are competing in an increasingly crowded marketplace and firmly established as an alternative to conventional share dealing, that is what financial spread betting is nowadays. After noting how their stock market fund managers have performed so poorly in the last market recession, many investors have turned to spread betting. Questioning the bad performance of their fund managers, is what these investors do, and not without reason given the dreadful losses some of these so called experts have suffered; they think that trying it themselves wouldn’t go any worse than that. Spread betting looks to continue becoming more and more mainstream, what with the increasing taxes and trading expenses and last year’s 28% CGT hike.

Seeking out providers who offer the most leverage. i.e. allow them to trade with minimum margins, is what many people looking to make their fortunes through spread betting,do. That the brokers are in fact giving them more rope to hang themselves, is what these inexperienced investors don’t realise – leverage in the hands of the unwary is very dangerous.

Investors would do well to seek out spread betting providers like Capital Spreads and WorldSpreads that offer competitive bid-offer spreads; after all the bid-offer spread makes up one of the main costs of spread trading so it is important to find a broker that allows you to trade cheaply as this can quickly add up to your trading costs. It doesn’t mean much in itself, and hence the bid-offer shouldn’t be viewed in isolation. For instance it is useful to have great spreads if your provider gives you bad execution or stops trading in volatile market conditions or worse the platform freezes during major news release reports from the USA.

Most spread betting providers nowadays offer demo simulators and you would do well to test the platform out in this way to see if it meets your needs. Most brokers also tend to offer bonuses and offers in an effort to attract your custom but keep in mind that casinos offer bonuses and this should not be your principal decision-point for choosing a spread betting provider – what you are seeking is a spread betting broker that offers you competitive spreads and execution mainly. Also, do check and send a few e-mails to the customer support team to see if they take the time to reply to your questions or whether they simply send you canned responses or worse – ignore your questions!

You do need to understand that spread betting is not an one-way street and this method of trading is not suitable for all investors. As an example, spread trading is something that gamblers would do well to stay away from, and similarly spread betting is not suitable for people who are risk averse or looking to trade over long term horizons. Some trading brokers offer guaranteed stops and this is nice to have, however bear in mind that utilising these kind of stops usually carries an additional cost in the form of a wider bid-offer spread.

Author is an expert on spread betting brokers and compare bid-offer spreads.