Spread betting

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7. Practical advantages - leverage

One of the big advantages of spread betting is the leverage it offers.

Translated, "leverage" just means that you can make a large profit with a relatively small stake, which isn't the case with ordinary share investment.

Suppose you have £5,000. You could buy shares with that money, and if you did very well you might increase it by 20% over a year to £6,000.

Alternatively, you could use that £5,000 to place a succession of spread bets, and if your judgement was spot on every time, you could triple it, quadruple it or do even better.

Of course, leverage is a double-edged sword. With shares, the worst that can happen to your £5,000 investment is that you lose the lot. With £5,000 of spread bets, your potential losses are not limited to your stake - you could lose many, many times more.

Experienced spread-betters use stop-losses and "limited-risk bets" to limit the downside.

1. What is spread betting? 2. A brief history 3. Spreads on individual equities 4. Spreads on an index 5. Performance spreads 6. Other financial spreads 7. Practical advantages - leverage 8. Practical advantages - going short 9. Practical advantages - hedging 10. Practical advantages - volatile markets 11. Practical advantages - tax 12. Dynamics - think short term 13. Dynamics - the size of the spread 14. Dynamics - upside and downside 15. Dynamics - length of bet 16. Strategy - bet only what you can afford 17. Strategy - cutting losses 18. Strategy - stop losses and limited risk bets 19. Strategy - taking profits 20. Strategy - arbitrage 21. Opening an account 22. Placing a bet and managing your account 23. Regulation 24. Some more tips 25. Conclusion