Have you been interested in all the talk of margined trading with spread tatal bet? Do you want to know more about what it is? Margined trading is actually where the investor will borrow money from the broker. The investor will then put down money and be able to buy two times the amount of the cash down. This is called the margin. Note that margined trading is very risky.
How does margined trading work with financial spread betting? Basically your margin is a deposit that you make in order to cover potential losses when you are making your bet. Different companies will demand different margin sizes when spread betting and the amount will depend on the amount that you bet – the larger your bet, the larger your potential losses and so the larger your margin. This serves to protect the company with whom you are placing your bet, as well as ensuring that you enter into a bet with the right mind-frame – you’re not just risking the amount of your ‘buy’, but the entire amount of your margin if you lose your bet.
With margined trading the margin is calculated according to the value of the bet and the percentage margin required by the spread betting company. In order to work out your margin you take the quoted share price in pennies, multiply it by your bet amount in pounds and then multiply it by your company’s percentage margin requirements. The margin is typically very large in comparison with the size of your bet when spread betting so this is not an investment for those with very little cash.
On the other hand, you are only paying a small percentage of the value of the bet which allows you to create great leverage and potentially make a lot of money from little confirmed capital outlay. If your spread betting is not going too well then you may find yourself getting a ‘margin call’. In margined trading, a margin call is when your margin is beginning to look insufficient to pay your losses. In this instance you will be faced with the option to either add more funds to your account, or close your position – if you wait too long the company will be forced to close it for you.
When you consider a bet, if you can negotiate a “stop loss” as low as possible then it may well help you. Using as little margin as possible is also a smart step. The key principle with spread betting is to maximize your successes and minimize your losses, if at all possible, at the same time. Usually this will involve a careful analysis of both, taking into account the risk/reward ratio of your particular bet. Without this level of thought, financial spread betting is a sure fire way to lose money rather than make it.
