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What are the key differences between spread betting firms to consider?

We’ve broken down the key difference between spread betting companies into the following sections:

  1. The Spread
  2. The Margin and leverage
  3. Account opening offers
  4. Markets offered
  5. Other common differences between spread betting companies

Key difference between spread betting firms #1

‘The Spread’

Our glossary gives a definition of what the spread is, however in terms of what is best for you as a trader, the smaller (often referred to as tighter) the spread offered, the better. This is because you are speculating on the fact that your position will finished either outside of the spread, so the more numbers inside the spread (ie the larger the spread) the more chance that the spread betting provider takes your money.

However, be aware that the spreads offered within a single firm can vary across different products, during differing market conditions, and even depending on the time of day you want to trade! For example, some spread betting firms enable you to trade positions outside of conventional market hours, however normally at the cost of a wider spread.

Key thing to remember: When picking which spread betting company has the best spreads for you, you want to find the company with the tightest spreads, on the products that you want to trade, at the times you want to trade them.

Key difference between spread betting firms #2:

‘The margin’

The margin is essentially the amount of money that you need to part with in order to make a trade. This has important consequences as an investor, as a fundamental premise behind measuring the performance of your investments is you return on capital. Spread betting is leveraged, meaning that if you want to have £1000 exposure to a stock, you only need to deposit a percentage of that exposure with the spread betting company. If you need to need to understand more about how this works, read here and here.

Once again, the margin varies across different products, therefore be sure to understand the margin calculation process for your chosen spread betting company if you want to know who is providing you the best leverage. The amount of leverage you require depends on own risk and investment philosophy. If you are more of a casual spread bettor, who just wants to invest in some regular stocks and do anything particularly fancy, you might be better off choosing a provider who can offer you slightly better spreads at the expense of requiring a slightly bigger margin.

Key thing to remember: If you are using spread betting to gain the maximum leverage on your investments, then pick a spread betting company with the lowest margin requirements (or equivalent measure, e.g notional trading requirement). Be aware though that leverage carries a significant risk, and therefore you can lose more than your original investment, and if leverage is not your number 1 priority, you might want to choose a spread betting company with the tightest spreads over one with a bigger margin.

Key difference between spread betting firms #3

Account opening offers

Account opening offers come across as very attractive, particularly when you are new to spread betting, or come from a sports betting or gaming background, as the scale of the bonuses offered are relatively high. However, it is important to stress that there are minimum bet requirements attached to these offers, and if you are a spread betting beginner and don’t fully understand how the spread betting process, you can very quickly loss more than the bonus on offer, so be sure to read up on how it works and how to minimise your risks before you get started.

Key thing to remember: Other than ensuring that, if you are a beginner, before you get sucked in by the size of the bonus on offer you understand what the minimum deposit and bet conditions of the offers and how spread betting works, there isn’t much more to know about sign-up offers.

Key difference between spread betting firms #4:

‘The markets’

A significant advantage of spread betting over traditional forms of investment is that you have immediate access to a variety of markets that are conventionally more difficult to get access to. If you are only interested in trading UK stocks, then you don’t need to do much research across the spread betting companies on offer, as they all cater for UK stock trades.

However, if you want to trade things like: commodities, aim listed companies, or average house prices, then you’ll need to do a bit of research into which companies can provide the service you need. This is where having more than one account also comes in handy; because if you know what you’re after, it’s easy to just check on all your accounts whether they have the product. You can also read our summary of the different markets offered by the main spread betting companies, to get an overview.

One thing to be aware with access to markets is that generally the more common markets offer more competitive prices – largely because there is more competition within these markets. So if you are looking for a less conventional market to invest in, keep an eye on the price offered, and it is definitely worth shopping around the different providers.

Lastly, whilst spread betting generally offers access to a variety markets without any complication, there are certain markets that may require one off or monthly administrative fees for you to get access to, such as the Australian stock market. We cover this more in our comparison of the markets offered by spread betting companies.

Key things to remember: No single spread betting company has access to all of the markets, so if you are thinking of spread betting beyond the main exchanges (ie FTSE & Dow), then use our market overview as a guide, but it is worth signing up to more than one provider so that you can shop around.

Other common differences between spread betting companies

It is not only the price and markets offered to you that differentiate the various spread betting companies. Other factors can make the difference between 2 similarly priced companies, for example:

  • Mobile trading
  • Demo accounts
  • Trading hours (some companies allow you to trade outside of market hours, some don’t)
  • Credit accounts (some companies will offer you a credit facility, so that you can pay the margin with this facility, so that you don’t need to part with any cash at all).
  • News, and charting information

These items don’t really require much explanation, they are pretty much what they say they are, however not every company offers them, so it is something to be aware of when choosing your spread betting provider(s). In addition, the quality of the offering on things such as mobile trading can equally make or break your spread betting experience. Our spread betting company comparison gives an overview of which spread betting companies offer these additional services.

Read about the less well-known differences between spread betting companies?

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