• Trading Guide: How to choose a spread bet provider

    When choosing a spread bet provider you should think like a businessman, and here are the two main things you should keep in mind:

    - Your main goal is to make a profit – so keep your costs low;

    - You want a partner you can trust and one that can deliver on its promises – never settle for less.

    So let’s consider the first issue – keeping your costs low to help you make a profit:
    It goes without saying that you need a sound trading strategy in order to be profitable, whether you’re a day-trader or a long-term position taker.  But there are also a couple of important issues to consider which can make a very big difference when you’re starting out, particularly if you are dipping your toe in with small stakes to begin with. Firstly, and most importantly, there’s the spread. The spread is the difference between the buying (bid) price and the selling (ask/offer) price of the market you are trading. This is what your broker charges in order for you to open and then close a trade and you have to overcome this spread in order to make a profit. You don’t want to pay too much, so make sure you do some thorough research and look for brokers with the lowest spreads - at least for the markets you plan on trading the most (be it the FTSE100, Brent Crude or FX). Also, pay attention to variable spreads. Some brokers increase their spreads depending on the time of the day, if there are increases in volatility or if the spread on the underlying market widens. Furthermore, it’s also worth finding out what the broker charges for holding positions overnight (funding). After all, you may want to keep your position open for more than one day.

    It is also important to have a long hard look at the broker’s trading platform. What you want is a clear and simple platform that offers fast and reliable execution, with both desktop and mobile applications. The latter is particularly important if you intend opening and closing your positions over a short time-frame.

    Last, but not least, don’t choose a broker simply because it offers low margin requirements. It is vitally important to ensure that you trade your account sensibly and are fully aware of the risks of leveraged trading. Low margin requirements can be misleading in that they don’t properly express the risk inherent in a particular trade. You should open positions based on thorough technical and fundamental analysis (not because the margin requirement is low) and choose your stops and limits in the same way. Remember that keeping trading costs down is one step closer to being profitable. But the margin requirement shouldn’t be considered a cost. A small margin requirement can give you a false idea of the risks involved and won’t act as a buffer should a market move against you.

    The second issue to consider when choosing a spread betting provider is to do with trust:
    In this regard make sure you partner up with an FCA regulated broker. You should also find out if they offer protection through the Financial Services Compensation Scheme. Also, it’s worth finding out how long the company has been operating and checking that it has a reputation for top notch customer service. All this would be a plus in terms of trust.

    I would also advise you to look at the educational material and market analysis that the broker provides on its website. How much the broker invests in the education of its customers can give you a good idea about where the company’s priorities lie. A strong set of training guides and regular market updates suggests that the broker is thinking about its customers and operating its business in a fair and helpful manner.

    To conclude, the best spread betting providers are the ones that offer you the lowest trading costs in terms of dealing spreads and overnight funding, along with a fast and reliable platform and operate within a regulated environment with professional personnel. Keep that in mind and you will start off on a great footing.

    Disclaimer: Spread Co is an execution only service provider. The material on this page is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by Spread Co Ltd or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. This material has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. As a marketing communication it is not subject to any prohibition on dealing ahead of the dissemination of investment research, although Spread Co operates a conflict of interest policy to prevent the risk of material damage to our clients.