Spread Betting Companies and Accounts 2013

spread bettingThere are various spread betting companies in the UK, all operating under the regulation and supervision of the Financial Services Authority (FSA). Each spread betting company offers different trading platform, margin requirements and types of orders to initiate or close a spread bet.

Some suit the beginner trader while others suit the more experienced traders. For beginner traders, it is believed that spread betting firms such as Finspreads, offer the most user friendly trading platform, one that the novice user can use immediately to familiarize themselves with trading. Finspreads also have the lowest minimum stake (amount per point being traded), which at the moment is 10p, most other firms have a minimum stake of ₤1 which is a lot for a beginner trader.

Finspreads also offer a ₤100 credit bonus to all new accounts. Please be aware that these bonuses should not in any way be the reason to choose one firm over another, credit and referral bonuses are great but the real reason Finspreads is the best choice for beginners is because of the simplicity of the trading platform, it’s very unlikely that the novice trader will place the wrong trade or click on the wrong instrument, this is very helpful.

Other great spread betting companies, best rated by clients are: CityIndex, CantorIndex, IGindex, Capital Spreads, and Financial Spreads. IGindex is most popular among professional traders, it has the highest minimum trading stake, but also the highest liquidity, which means it is safe to trade there even with large amounts of money, and at significant stake size.

Most spread betting firms are ok to trade with, and work fine for up to ₤100 per point, but if you are planning to go above that level then IGindex is better than say Finspreads, and in fact better than most other firms.

Generally all spread betting firms such as the ones listed here will open you an account for as little as ₤100 or less but some may subject you to a credit check, or employment status. IG Index is one such firm that take social responsibility seriously, they may not open you a trading account if they feel that you are unemployed, tight on funds, or that you cannot really afford to lose your initial deposit. This is only done so as to protect new inexperienced traders from gambling away their money. Under normal circumstances however they will gladly accept you, and will open you a spread betting account for as little as ₤100. Opening an account doesn’t not mean that you can trade all instruments available, each instrument such as FTSE100 index, or BP stock, or price of oil requires a different margin, which is usually anything from 1% to 50% of the value of the asset, so for example if a spread betting firm has a 10% margin requirement on UK stocks, and you want to buy their spread market (at the equivalent of buying ₤10,000 worth of those shares), then the required margin will be 5% of ₤10,000 or ₤500. Generally speaking currencies have very low margin requirements, stock indices have high.

How to choose the right spread betting firm:

Depending on whether you want to trade a specific commodity, and you want to trade the very short term trend or longer term trend, then you will have to look at the spread size (the difference between buying and selling), as well as margin requirements. To a short-term, high frequency trader, a spread betting firm with minimum spread commission is best, while they are willing to commit to higher margins, whereas a long term trader will go for a firm that offers minimum margin requirements so as to have more capital available for longer periods of time, to this trader spread commission is not an issue since the trades will be few, and long lasting. Another thing you should be aware of, is the possibility that you may actually need 2 spread betting firms, sooner or later you will use a strategy by where you buy a commodity for say 3 months, but at the same time you identify short lived daily drops in the price of that commodity, in order to trade those and opening trades in the opposite direction a single spread betting firm may not be able to facilitate this kind of hedging, spread betting firms don’t allow you to buy and sell the same commodity at the same time. They will usually have a variety of markets on the same underlying commodity, such as daily cash, rolling cash, and/or 2 quarterly contracts dated one ahead of the other. The daily markets follow actual market fluctuations to the penny, but expire at the daily session end, rolling cash markets also move penny for penny with the underlying market but expire at the end of the trading day too, the only difference is that it gets rolled over to the next day, this is not suitable for longer term trading since it doesn’t allow for using fixed stop loss & take profit orders, or a complete viewing of the total profit & loss over many days, daily cash and rolling cash markets are only good for intra-day trading! Quarterly contracts are great for longer term trading, however again it’s not possible to use the near dated contract for one trade and to hedge that using the far dated contract, quarterly contracts don’t necessarily move penny for penny with the underlying market, they do so eventually as they near expiration date, but in the meantime there are days and weeks where the underlying commodity may have moved by say 100 points, the near dated quarterly contract by 70 points, and the far dated quarterly contract by just 50 points! So if hedging is required on any given day or week, the trader can only achieve it by trading the same contract (March, or June, or Sept etc), on 2 different spread betting firms, buying it through one spread betting firm while hedging it with selling, through another firm, this simple tactic ensures full, penny for penny hedging.

One of the worst rated spread betting firms is CMC markets (CMCmarkets.co.uk), and while there’s no perfect firm and you will hear stories about freezing trading platforms and poor client support for several other firms, those are overall efficient and well rated. There are some newer ones that are still early to judge, and there’s CMC markets, a confirmed cheater and with a trading platform full of troubles. Cheating actually occurs on trading with large size, at ₤50 or more, it has been tested by actual traders buying and selling the same market at the same time, and comparing market fluctuations. Despite FSA regulation this cheating can occur, if the trader executes long lasting trades, over few days or weeks it won’t be an issue, but to a high frequency trader buying and selling a market every few minutes, this is a very big issue! Other issues encountered at CMC markets are unfilled orders, delays in getting trade confirmation or no confirmation at all resulting in confusion, this did happen to me several times.

For more detailed actual client feedback and further recommendations please visit the forums at Trade2win.com there you can see impartial detailed feedback and opinion from real traders of all sorts of account size, and for any spread betting firm. It’s free to join and discuss all matters regarding trading.