DEFINITION

Spread trading (AKA Spread Betting)

Spread trading is a way to speculate on financial markets, and is also the simplest way to do so.

The choice of available markets is huge, and includes stock indices, individual equities, commodities and forex, and you don’t have to own whatever it is you’re trading either. Instead, all you do is speculate on whether the price will rise or fall. If you’re right, you make a profit. On the flip side, you’ll lose money if the market moves against you.

Spread trading - Quick links:

• Our fixed spread markets
• What is ‘the spread’ in trading?
• Is spread trading for beginners?
• The bid-offer spread
• Spread trading in action - example trade
• Know the costs - what are spread charges?
• Risk management tools to help you trade responsibly
• How to start practicing spread trading with Trade Nation
• The final word from David, Senior Market Analyst

BUY-SELL SPREAD

Why do I keep hearing about the bid-offer spread?

A bid-offer spread is just another way to present the sell-buy prices we’ve already talked about. If you think a market is going to decline, you would look at the sell price which would be listed under ‘bid’.

The buy price (what you’d pay if you predict a market will increase in value) is always higher than the sell/bid price and will be listed under ‘offer’.

Some platforms will use a bid-ask spread rather than sell-buy, but they are the same thing.

EXAMPLE

Spread trading in action

Say you want to speculate on the price movements of the UK 100 Cash (aka the FTSE 100), you might get this buy-sell spread:

• BID:7224.8
  
  
• BUY:7225.2
  
  
• SPREAD:0.4PTS

As you expect the market to rise, you decide to buy £5 per point at 7225.2.

In both scenarios, the Trade Nation charge (a fixed spread of 0.4 points) doesn't change. This is why it is important to trade at a competitive fixed spread allowing you to reduce your transaction costs and maximise your returns.

KNOW THE COSTS

What are spread charges?

The spread determines how much you will be charged to make a trade, with smaller spreads being the most cost-effective.

But remember: spreads can be either fixed or variable! This is important to consider if you want to keep your trading costs as low as possible.

• Variable spreads can change at any time. If the market you’re trading on becomes volatile, the spread will widen and trading costs will increase. What if the spread is widest at the point you need to close a trade? As this is out of your control, you may end up paying more than planned and have diminished returns as a result.
  
  
• Fixed spreads are just that, fixed. They remain unchanged, subject to the opening times of the underlying market, regardless of how volatile price movements become. This gives traders vital advantages such as more transparency, lower costs and protection against volatility.

This is why we are very pleased to offer low fixed spreads here at Trade Nation.

No matter what happens in the markets, you can be certain that your spread won’t change because volatility shoots higher. You can enjoy minimal costs, maximum returns, and total transparency. And on top of that, we offer a unique loyalty bonus where we return up to 25% of the spread you pay every month*. It’s up to you whether you want to withdraw it or trade it, and there are absolutely no terms, conditions or questions to worry about.

However, remember that trading is never risk-free and losses are a regular occurrence. Make sure you understand the risks before placing a trade, and only ever risk money you can afford to lose.