At the last count there were more than 30 online spread betting companies. How does one choose from such a large group? What makes a good spread betting company and how do you know which spread betting company is right for you?
Rather than give you a list of spread betting companies, here are a few suggestions on what to look for when choosing a company to trade with.
Nobody wants to invest their hard-earned money through a spread betting company only to find out too late that it was a fly-by-night operator that went bankrupt, giving you little hope of recovering anything. Choosing a company which is regulated by the UK’s Financial Services Authority (FSA) can provide an extra layer of protection.
While you do not pay direct commissions when spread betting, many traders tend to forget there is a commission built into the spread: the difference between the buying and selling price of every trading instrument.
The smaller the difference between these two prices, the lower commission you are paying. While this might not matter much if you plan to trade once or twice a year, it will make a huge difference if you are day trading with a large number of trades every day.
Competition is fierce and many spread betting companies, like ETX Capital and FinancialSpreads.com, now offer spreads as low as 1 point on the FTSE 100 index.
Make sure the spread betting company you choose allows you to trade a wide range of financial instruments. Not all of them offer forex, stock market indices, individual shares, commodities and bonds.
For novice traders a free demo account can be a good opportunity to learn about the world of spread betting as you only speculate with virtual funds
With a demo account you can often make risk free spread bets on currencies, shares, commodities and indices, and even make use of candlestick charts with technical indicators, without risking a penny.
If you want to trade using your mobile phone, find a company that offers an iPhone trading app or a similar mobile platform. Make sure that the mobile spread betting platform allows you to open and close trades, view the latest charts and both set and edit stop losses.
As with any other product or service, customer support is of the utmost importance when deciding which spread betting company is right for you.
Call or email their trading desk and see how long they take to respond. Are their support staff knowledgeable about the products and services they offer? Ask them how often they experience technical problems and how long it usually takes to solve such a problem; reliability is vitally important from any trading platform.
Many of the leading spread betting companies also offer regular training seminars to help their clients improve the way they trade. They also have training manuals and online guides to help both inexperienced and practised traders.
Financial spread betting carries a high degree of risk to your trading capital and can result in you losing more than your initial stake. Ensure that it fits your trading requirements as it may not be suitable for all investors. Only speculate with money you can afford to lose. Before trading, please ensure you are fully aware of the risks that are involved and if appropriate seek independent financial advice.
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