Spread Betting 2024 – Tutorial and Brokers

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Christian Harris
Christian is a seasoned journalist with decades of experience. He transitioned from tech journalism to finance to follow his interest in investing. He has been trading stocks, futures, forex, and cryptocurrencies for more than 5 years, becoming an eToro Popular Investor. With hands-on expertise across various assets, he offers valuable trading insights.
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James Barra
James is an investment writer with a background in financial services. He has worked as a management consultant, where he delivered large-scale operational transformational programmes at some of Europe's biggest banks. James authors, edits and fact-checks content for a series of investing websites.
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Spread betting is a high-risk, high-reward way to speculate on the financial markets. This guide covers everything you need to get started, from explaining spread betting basics to understanding the tax benefits. Additionally, we have compiled a list of the best spread betting brokers.

Best Spread Betting Brokers

These 5 spread betting providers are regulated and offer a wide range of markets, low fees and excellent trading platforms:

Spread Betting 2024 - Tutorial and Brokers Comparison

Spread Betting 2024 - Tutorial and Brokers Comparison
Broker Minimum Deposit Trading Platforms Financial Regulator Our Rating Visit
Spreadex logo
£0 Spreadex Platform, TradingView FCA
Visit
AvaTrade logo
- WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
Visit
Pepperstone logo
$0 MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
Visit
CityIndex logo
$0 MT4, TradingView, TradingCentral ASIC, FCA, MAS
Visit
Trade Nation logo
$0 MT4 FCA, ASIC, FSCA, SCB, FSA
Visit
FxPro logo
$100 FxPro Platform, MT4, MT5, cTrader, AutoChartist, TradingCentral, DupliTrade FCA, CySEC, FSCA, SCB, FSC
Visit
CMC Markets logo
$0 Web, MT4 FCA, ASIC, MAS, CIRO, BaFin, FMA, DFSA
Visit
Markets.com logo
$100 Markets.com Web/App Platform, MT4, MT5 FCA, CySEC, ASIC, FSCA, FSC
Visit
Vantage logo
$50 ProTrader, MT4, MT5, TradingView, DupliTrade FCA, ASIC, FSCA, VFSC
Visit
IG logo
$0 Web, ProRealTime, L2 Dealer, MT4, AutoChartist, TradingCentral FCA, ASIC, NFA, CFTC, DFSA, BaFin, MAS, FSCA
Visit
ThinkMarkets logo
$0 ThinkTrader, MT4, MT5, AutoChartist, TradingCentral FCA, ASIC, CySEC, FSCA, JFSA, FSA Seychelles
Visit
FXCM logo
$50 Trading Station, MT4, TradingView, eSignal FCA, CySEC, ASIC
Visit
Core Spreads logo
$0 MT4 FCA
Visit
ActivTrades logo
$10 MT4, MT5 FCA, SCB
Visit
Admiral Markets logo
$100 MT4, MT5, TradingCentral FCA, CySEC, ASIC, JSC
Visit

#1 - Spreadex

Why We Chose Spreadex

Trade on thousands of financial markets with a bet size from £0.01 and the best margin rates in the industry. Spread bets are tax free in the UK, and Spreadex traders can access the markets via three slick proprietary trading platforms.

"Spreadex will appeal to UK day traders who are interested in both spread betting on financial markets and placing traditional bets on sports events. Fees are low on short trades and profits are tax-free on spread bets. There's also a powerful proprietary charting platform, plus £0 minimum deposit required to get started. "

- DayTrading Review Team
  • Instruments: Forex, CFDs, Indices, Commodities, Stocks, Crypto, Bonds, Interest Rates, ETFs, Options, Spread Betting
  • Regulator: FCA
  • Platforms: Spreadex Platform, TradingView
  • Minimum Deposit: £0
  • Minimum Trade: £0.01
  • Leverage: 1:30

About Spreadex

Spreadex is an FCA-regulated broker that offers spread betting opportunities on an impressive 10,000+ CFD instruments including 60 forex pairs. Traders can also take short-term positions on sporting events. The brand has been around for over 20 years and has won multiple awards.

Pros

  • The broker offers an easy-to-use proprietary charting platform and mobile app
  • There are some attractive new account promotions, including double the odds and matched betting offers
  • There's an excellent range of instruments and trading vehicles for short-term traders

Cons

  • The proprietary terminal lacks comprehensive charting features of platforms like MT4 and MT5
  • There's no support for expert advisors or other trading bots
  • The limited customer service can make it time-consuming to troubleshoot problems

#2 - AvaTrade

Why We Chose AvaTrade

AvaTrade continues to offer spread betting for UK traders via the MT5 platform, with zero tax on profits. There are no extra currency conversion fees on any asset and leverage is available up to 1:30. You can also practice in the free demo account.

"AvaTrade offers the full package for short-term traders. There is powerful charting software, reliable execution, transparent fees, and fast account opening with a low minimum deposit."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Indices, Commodities, ETFs, Bonds, Crypto, Spread Betting
  • Regulator: ASIC, CySEC, FSCA, ISA, CBol, FSA, FSRA, BVI, ADGM
  • Platforms: WebTrader, AvaTradeGO, AvaOptions, MT4, MT5, AlgoTrader, TradingCentral, DupliTrade
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail) 1:400 (Pro)

About AvaTrade

AvaTrade is a leading forex and CFD broker, established in 2006 and regulated across 9 jurisdictions. Over 400,000 users have signed up with the broker which processes over 2 million trades each month. The firm offers multiple trading platforms, including MT4, MT5, and a proprietary WebTrader. 1250+ financial instruments are available for day trading, alongside a comprehensive education center and multilingual customer support.

Pros

  • The broker’s unique risk management tool, AvaProtect, protects against losses up to $1 million and is easy to activate in the platform
  • There's a great range of fee-free deposit methods, including bank wire, credit cards and popular e-wallets like Skrill
  • WebTrader is well-suited to beginners and features a strong suite of technical analysis tools and market research for day traders

Cons

  • A high $2000 minimum investment is required to use DupliTrade, which will be out of reach for many beginners
  • There’s an above-average $50 inactivity fee after three months, though this won't impact active day traders
  • There is no ECN account with raw spreads

#3 - Pepperstone

Why We Chose Pepperstone

Pepperstone extends financial spread betting services to both retail and professional traders, enabling you to speculate on forex, indices, shares, and more. Additionally, Pepperstone offers comprehensive training resources if you are new to spread betting, helping to facilitate your journey into this tax-efficient form of trading. Pepperstone also now offers spread betting on TradingView, making it one of a handful of brokers that provide this service.

"Pepperstone stands out as a top choice for day trading, offering razor-sharp spreads, ultra-fast execution, and advanced charting platforms for experienced traders. New traders are also welcomed with no minimum deposit, extensive educational resources, and exceptional 24/7 support."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Currency Indices, Stocks, Indices, Commodities, ETFs, Crypto, Spread Betting
  • Regulator: FCA, ASIC, CySEC, DFSA, CMA, BaFin, SCB
  • Platforms: MT4, MT5, cTrader, TradingView, AutoChartist, DupliTrade
  • Minimum Deposit: $0
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:500 (Pro)

About Pepperstone

Established in Australia in 2010, Pepperstone is a top-rated forex and CFD broker with over 400,000 clients worldwide. It offers access to 1,300+ instruments on leading platforms MT4, MT5, cTrader and TradingView, maintaining low, transparent fees. Pepperstone is also regulated by trusted authorities like the FCA, ASIC, and CySEC, ensuring a secure environment for day traders at all levels.

Pros

  • Now offering spread betting through TradingView, Pepperstone provides a seamless, tax-efficient trading experience with advanced analysis tools.
  • Pepperstone boasts impressive execution speeds, averaging around 30ms, facilitating fast order processing and execution that’s ideal for day trading.
  • Award-winning customer support is available via telephone, email or live chat with response times of <5 minutes during testing.

Cons

  • Despite enhancements to its range of markets, crypto offerings are relatively limited compared to other brokers such as eToro, with no option to invest in real coins.
  • There’s no simplified proprietary trading platform, nor are there any social trading features, which could be a disadvantage if you are new to day trading.
  • Pepperstone’s demo accounts are active for only 30 days, which may not be not long enough to familiarize yourself with the different platforms and test trading strategies.

#4 - CityIndex

Why We Chose CityIndex

Spread bet on thousands of global markets with no commissions and tight, fixed spreads.

"City Index is best for new and intermediate traders looking for a wide selection of assets on user-friendly platforms."

- DayTrading Review Team
  • Instruments: CFDs, Forex, Stocks, Cryptos, Options, Commodities, Bonds
  • Regulator: ASIC, FCA, MAS
  • Platforms: MT4, TradingView, TradingCentral
  • Minimum Deposit: $0
  • Minimum Trade: 0.01 Lots
  • Leverage: 1:30 (Retail), 1:50 (Accredited Investor), 1:200 (Sophisticated Investor), 1:300 (Wholesale Investor), 1:400 (Professional Trader). Varies with jurisdiction.

About CityIndex

City Index is an established and award-winning forex, CFD and spread betting broker with top-tier global regulation, including in the UK (FCA) and Australia (ASIC). With 30+ years in the industry, 13,500+ instruments and 24/5 customer support, City Index is a solid pick for aspiring traders.

Pros

  • Excellent reputation with over 1 million account holders and tier-one regulatory oversight
  • Tight spreads from 0.5 pips on EUR/USD and competitive commissions on CFD shares
  • Extended hours trading on 70+ popular shares including Amazon and Tesla

Cons

  • Cryptocurrency trading not available in all locations
  • No Islamic account for Muslim traders
  • $15 monthly inactivity fee

#5 - Trade Nation

Why We Chose Trade Nation

Trade Nation offers competitive spread betting conditions and transparent fees on hundreds of assets. On the proprietary platform, spread betters also enjoy a user-friendly and customisable interface.

"Trade Nation is a good choice for newer traders looking for a wide range of financial markets on a user-friendly platform. There is no minimum deposit, free funding options and strong education."

- DayTrading Review Team
  • Instruments: Forex, CFDs, Indices, Shares, Commodities, Futures, Bonds, Cryptos (Bahamas Entity Only)
  • Regulator: FCA, ASIC, FSCA, SCB, FSA
  • Platforms: MT4
  • Minimum Deposit: $0
  • Minimum Trade: 0.1 Lots
  • Leverage: 1:500 (entity dependent)

About Trade Nation

Trade Nation is a top FX and CFD broker regulated in multiple jurisdictions including the UK and Australia. The firm offers low-cost fixed and variable spreads on 1000+ assets with robust trading platforms and training materials. The Signal Centre can also be used for trade ideas.

Pros

  • Multiple account currencies are accepted for global traders
  • Full range of investments via leveraged CFDs for long and short opportunities
  • A choice of trading platforms and apps, including MT4, make the brand a good fit for savvy traders

Cons

  • Fewer legal protections with offshore entity

What Is Spread Betting?

Spread betting is a trading method where you speculate on the price movement of financial assets, such as stocks, commodities, or forex, without owning the underlying assets.

Unlike traditional stock trading, where you buy and own shares, spread betting involves making bets on whether an asset’s price will rise (buying) or fall (selling).

In spread betting, you place a bet on the spread, which is the difference between the buying (bid) price and the selling (ask) price of the asset. You profit or incur losses based on the extent to which your prediction is correct, and your stake size determines the magnitude of your gains or losses.

Spread Betting costs on IG platform
IG – Spread Betting Platform

Spread betting typically involves leverage, allowing you to control a more extensive position with a smaller initial investment. While this can magnify profits, it also escalates potential losses.

The cost of initiating your trade is typically integrated into the spread. As a result, the spread entails buying slightly above the market price and selling slightly below it.

Take the FTSE 100, for example, with a spread of 1 point. This signifies that the buy price is situated 0.5 points higher than the current market price, and the sell price is 0.5 points below. Within this 1-point spread, your broker’s fees for opening and closing your position are encompassed.

In some countries, such as the UK, spread betting offers tax advantages over traditional trading methods.

However, the high level of risk involved, coupled with the use of leverage, means that it’s crucial to understand the markets you’re trading in, employ effective risk management strategies, and be aware of the local regulatory and tax implications.

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Christian Harris
Author

What Markets Can You Spread Bet On?

Spread betting allows you to speculate on the price movements of a wide range of financial markets. The markets available for spread betting can vary depending on the spread betting provider and the regulations in your region, but typically include:

Spread Betting Vs CFD Trading

Spread betting and contracts for difference (CFDs) are both forms of derivative trading, but they have some key differences:

Market Access

Spread betting typically offers access to a wide range of financial markets, including stocks, indices, currencies, commodities, and more.

CFD trading similarly offers access to a variety of financial markets, such as stocks, indices, forex, and commodities.

Ownership Of Assets

In spread betting, you do not own the underlying assets. You are speculating on the price movement of the asset without owning it.

CFD trading also does not involve ownership of the underlying asset. It is a contract between you and the CFD provider to exchange the difference in price between the asset’s opening and closing prices.

Trading Mechanics

In spread betting, you bet a certain amount per point move in the asset’s price, and the profit or loss is determined by the number of points the price moves in your favor or against you.

In CFD trading, you enter into a contract with a CFD provider to exchange the difference in the price of the underlying asset between the contract’s opening and closing. Profit or loss is calculated based on the change in price.

Taxation

In some countries, spread betting is treated as a form of gambling and is typically tax-exempt. Profits made from spread betting are not generally subject to capital gains tax or stamp duty. However, it may not be available in all countries.

CFD trading is generally subject to capital gains tax or other relevant taxes, depending on your jurisdiction.

Regulation

Both spread betting and CFD trading are subject to regulation in many countries. Regulatory standards are in place to protect traders and ensure fair trading practices.

Spread Betting Vs Stock Trading

The choice between spread betting and stock trading depends on your financial goals, risk tolerance, and the specific tax and regulatory environment in your jurisdiction.

Spread betting is often favored for its tax advantages and flexibility in trading various markets, while stock trading provides ownership of assets and potential dividends but may come with tax implications.

Spread betting and stock trading differ in several key ways:

Ownership Of Assets

In spread betting, you do not own the underlying assets (e.g., stocks). Instead, you are placing a bet on the price movement of shares.

In stock trading, when you buy shares of a company, you own a portion of that company, with the associated rights and responsibilities, such as voting rights and dividend eligibility.

Tax Treatment

In some regions, spread betting is considered a form of gambling, and any profits made from spread betting are typically tax-exempt. This can make it a tax-efficient option for certain traders.

In stock trading, profits are often subject to capital gains tax, and you may also incur other taxes and fees depending on your jurisdiction.

Leverage

Spread betting often involves the use of leverage, which allows you to control larger positions with a relatively small amount of capital. This leverage can amplify both gains and losses.

Stock trading typically does not involve the same level of leverage. You usually need to invest the full amount to purchase shares, although some brokers do allow the purchasing of fractional shares.

Regulation

Spread betting is regulated in many countries, with rules and standards set by relevant financial authorities.

Stock trading is also highly regulated, with rules and regulations set by stock exchanges and government agencies.

Market Access

Spread betting allows you to speculate on a wide range of financial markets, including stocks, indices, currencies, commodities, and more.

Stock trading involves buying and selling shares of individual companies listed on stock exchanges.

Dividends And Voting Rights

In stock trading, as a shareholder, you may be entitled to receive dividends and have a say in company decisions through voting rights.

In spread betting, you do not have such rights because you do not own the underlying stocks.

Pros & Cons Of Spread Betting

Pros

  • Tax Efficiency: In some regions, spread betting is considered a form of gambling, and any profits made from spread betting are typically tax-exempt. This can provide a tax-efficient way to speculate on financial markets, as gains are not subject to capital gains tax or stamp duty.
  • Leverage: Spread betting allows you to use leverage, so you can control larger positions with a relatively small initial investment. This leverage can amplify potential profits, but it also magnifies losses.
  • Diverse Market Access: Spread betting provides access to a wide range of financial markets, including stocks, indices, currencies, commodities, and more. You can diversify your portfolios and trade multiple asset classes from a single account.
  • Short Selling: Spread betting lets you profit from falling markets by taking short positions. This flexibility enables you to make gains in both rising and falling market conditions.
  • No Ownership Of Assets: When you spread bet, you do not own the underlying assets. This means you can speculate on price movements without the need to buy and hold physical assets, making it a more cost-effective and accessible way to trade a variety of markets.

Cons

  • Tax And Regulatory Changes: Tax laws and regulations regarding spread betting can change over time and vary by jurisdiction. What is currently tax-efficient may not remain so in the future. You should stay informed about the latest tax and regulatory developments in your region.
  • Costs And Spreads: Spread betting involves costs in the form of spreads (the difference between the buying and selling price), overnight financing charges, and, sometimes, platform fees. These costs can eat into profits, and you need to consider them when making trading decisions.
  • Market Volatility: Financial markets can be highly volatile, and this volatility can lead to rapid and significant price movements. You need to be prepared for market swings and have risk management measures in place to protect your capital.
  • Limited Risk Management Tools: While spread betting platforms offer some risk management tools like stop-loss orders, they may not provide the same level of control as other trading platforms. Additionally, during extreme market conditions, stop-loss orders may not guarantee execution at the desired price, potentially leading to larger losses than anticipated.
  • Complexity And Learning Curve: Spread betting can be complex, especially if you are new to online trading. Understanding the mechanics, risk management strategies, and various markets can take time and effort. Beginner traders may find it overwhelming, leading to potential losses due to lack of experience.

How To Start Spread Betting

Let’s go through a detailed example of making a spread bet on oil. Note that this is a simplified illustration, and actual trading involves more complexities and risks.

Step 1: Research And Analysis

Before making a spread bet, conduct thorough research and analysis to understand the market and asset you want to trade. This includes studying the market trends, news, and any other relevant information.

In this example, you believe that oil’s price is going to increase.

Step 2: Choose A Broker

Select a reputable spread betting broker that offers access to the financial markets you’re interested in. These are the key considerations to take into account when comparing providers:

You can then create an account with the spread betting provider. This involves providing personal information, verifying your identity, and depositing funds into your trading account.

IG Group's spread betting platform
IG Spread Betting Platform

Step 3: Place The Bet

Considering that you have a bullish outlook on the price of oil and expect it to rise, you initiate a ‘Buy’ trade with a stake of £2 per point. Under this arrangement, for every point that the price of oil climbs, you’ll gain £2. Conversely, if the price of oil drops, you’ll incur a £2 loss for every point of descent.

The ultimate determination of your profit or loss occurs when you decide to close your position. For example, if the price of oil has surged by 50 points since your initial purchase, your profit would amount to (£2 per point x 50 points) £100. Conversely, if the price had declined by 50 points, you would face a loss of £100.

After closing the position, review your spread bet trade, and assess what went well and what could have been done differently. This analysis can help you improve your trading strategy for future spread betting trading.

Taxes

The tax treatment of spread betting depends on the country and its tax laws. In some countries, such as the UK, spread betting is considered a form of gambling, and any profits made from spread betting are normally tax-exempt. This can make spread betting a tax-efficient option.

In the usual investment scenario, realizing a profit involves selling your security such as shares, and any earnings are subject to Capital Gains Tax (CGT) and Stamp Duty, with the total tax dependent on your capital level and earnings.

However, spread betting works differently since you never take actual ownership of assets. When you close your spread betting position, the profits you earn are entirely yours, free from tax obligations.

For instance, let’s consider you purchased 1,000 shares in a company at £1 each and then closed your position when the share price reaches £1.60, resulting in a profit of £600.

If we assume a CGT rate of 20% and a 0.5% stamp duty, the total tax liability would be 20.5%, equivalent to £123, leaving you with £477.

In contrast, if you executed the same trade as a spread bet, your £600 profit would remain entirely tax-free.

Tax laws can vary significantly from one jurisdiction to another, and they may change over time.

Therefore, I recommend consulting with a tax advisor or financial professional who is knowledgeable about the specific tax regulations in your country to understand how spread betting is treated for tax purposes.

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Christian Harris
Author

Terminology

Below is a spread betting glossary, where you will find a breakdown of all the essential jargon.

Bottom Line

Spread betting effectively reduces the financial entry barrier for beginner traders and provides a diverse alternative market. While the allure and risks of excessive leverage remain a prominent concern in spread betting, the modest initial capital requirement, the availability of risk management tools, and tax advantages render it an attractive option for speculators.

Use our rankings of the best spread betting brokers to get started.

FAQ

How Does Spread Betting Trading Work?

Spread betting is a trading product where you speculate on the price movement of various assets, such as stocks, commodities, or currencies, without owning the underlying assets.

It involves making bets on whether the price of an asset will rise or fall, with profits or losses determined by the accuracy of the prediction.

What Is The Difference Between Spread Betting And CFDs?

Spread betting and CFDs are leveraged financial instruments that allow you to speculate on the price fluctuations of financial markets, but they employ distinct mechanisms.

In spread betting, you place a wager by staking a specific amount per point based on your market prediction, while CFDs involve trading contracts that entail exchanging the price difference of an asset from the moment you initiate the position to when you terminate it.

What Countries Allow Spread Betting?

The UK and Ireland are well-known for offering spread betting, and it is a popular form of trading in these countries. However, spread betting is also available in some other countries, including Australia and South Africa, where it is regulated.

The availability and regulation of spread betting can vary, and it is not currently permitted in the United States.

Is Spread Betting More Profitable Than Stock Trading?

The profitability of spread betting versus stock trading depends on individual trading strategies, market conditions, and risk management.

While spread betting offers tax advantages and the potential for leverage, it also carries higher risks.

How Are Spread Bets Taxed?

This depends on the country. Spread bets are exempt from capital gains tax in the UK, for example, which means you’re not liable for tax on your profits, unlike in traditional share dealing. Additionally, there’s no stamp duty to be paid.

With that said, tax laws can vary depending on your trading frequency and profitability.

Article Sources

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