The importance of comparing spread betting companies

Created on Sunday, 18 March 2012 16:11

When an individual starts to spread bet and researches Spread betting companies to help him or her decide which company is best to open an account with, we all know that tight spreads are key, but why are tight spreads so key and should they be the only thing that you consider when making this decision?

The main cost to financial spread bettors is the spread, the difference between the buy and the sell price, which is why the tighter the spread the better the investment. Therefore it goes without saying, the wider the spread the more costly the investment to you, the investor. Finding a company that offers you the tightest spreads allows you to recover your investment quicker, unfortunately the way the spread works you always start by making a loss and need to wait for prices to move outside the spread in order to move into gain. So if you compare spread betting companies, the spreads that they offer should be the first thing that you consider. You should try and pick a company that offers consistently low spreads, for example WorldSpreads is famous for offering zero spreads on some markets, WorldSpreads shares are now suspended, therefore showing the importance of going for a company that consistently offers lower spreads rather than one that offers spreads that are too good to be true as a marketing ploy.

Margin requirements are another important aspect to consider when doing a spread betting company comparison. Margin is the amount of cash you need in your trading account in order to make a trade. A low margin requirement means that you only need to deposit a small portion of the value before you can open a trade. As discussed, margin requirement and tight spreads are clearly not the only thing that you should be looking at when you compare spread betting companies. Remember that spread betting allows the trader to take a geared position so you can always lose more than your initial deposit. It is therefore important to consider how to minimise your risk by making the most of the various tools many spread betting companies make available to you. This is an important consideration when researching spread betting companies as many companies offer a vast array of education and learning tools to help their traders minimise risk – which you should be looking to take advantage of.  See below a selection of tools which you should consider when you are deciding which spread betting company to open an account with.

Services and tools that spread betting companies offer to minimise risk include; new account offers, 24 hour trading hours, automatic stop losses, guaranteed stop losses and trailing stops are other points that you should thinkabout when looking at spread betting brokers. Many spread betting companies also offer a wide selection of online modules which you must take advantage of. Nobody expects you to jump into spread betting without any helps so always open a FREE demo account. Demo accounts allow you to trade with virtual money and receive access to a variety of markets. Spread betting demo accounts allow you to familiarise yourself with the different trading platforms on offer without risking your own funds. Familiarising yourself with trading platforms is essential when you start to trade with a new spread betting firm as you will minimise the risk of making elementary mistakes which can be easily avoided. Finally, it is always advisable to stay “in the know” and attend some FREE seminars that the superior spread betting companies have on offer, if you can’t physically get to the seminars then try and attend some webinars that permit you to keep your trading knowledge up to date in the comfort of your own home or office.

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