Best spread betting company
With its tax free advantages and no broker commissions financial spread betting is becoming an ever more attractive option to anyone interested in trading shares. With the growth in interest comes a growth in providers and there is now a multitude of options available.
Your spread betting requirements
Before you can start considering which is the best spread betting company for you, you need to decide what you require from a firm. Here are some questions to ask yourself:
What do you expect to be the average size of your bets?
If the answer to this is less than £100 you need to consider the minimum stake size offered by the firm. If the minimum was for example £10 per point then a share movement of a mere 20 points can lose you £200. You can of course set stop losses but if these are too tight because you can't risk the exposure you will find yourself being bounced out of bets left, right and centre. That's a quick way to throw your money away. In such a case you may be better of going with a company that offers bets as low as £1 per point. A few companies will even offer 10p a point, but usually this is for a short period and only for new customers.
Remember also that it is good practice to have a variety of bets open to spread the risk: some down bets and some up bets. So if you are prepared to have say £1,000 at risk on the market then it would be safer to have it divided between 5 - 10 positions (i.e. £200 - £100 per bet). This may mean having lower bet sizes than you may have first thought.
How much support will you need?
If you are new to financial spread betting and you find some of the language a bit bamboozling, you may feel the need to talk through issues when they arise. Check out what customer service each firm offers and decide if it's good enough for you. You could even try ringing their help-line with a fabricated query and see how warmly they respond. Always remember though, it's best to ring brokers during out of market hours, as things can get very hectic when the markets are open (especially near to closing). Also bear in mind how savvy you are with computers, as much of the trading will be via their website trading platform and, although these days they do tend to be very robust, there are occasional problems that occur with particular browsers and operating systems.
What do you want to trade?
For most it will be fairly straightforward: FTSE shares, major currencies and major stock market indices. Just about all spread betting companies will offer you access to these markets. If you are interested in trading something a little more specialized - like the Russian stock market or perhaps asian currencies - you are going to have to hunt around a bit. Remember that when people get used to a trading platform they don't like to change, so think ahead to what you may want to bet on in the future.
Are you interested in long or short term trades?
If intraday trading is your bag (sitting at your computer making minute by minute bets, closely following the twists and turns of the market), you need to find a firm that offers the narrowest of spreads. When you are making money on very slight share movements the transaction costs can be crucial to your success or failure. Also in such deals too much slippage (the amount a share moves before the broker actions your order) can eat into your profits. Some firms are better at this than others. Most people have positions open for a few days or weeks so the tightness of spreads offered isn't crucial. However it is still a very important factor in making your decision.
Spread betting company checklist
These are the things you need to look for in a spread betting provider in rough order of importance:
- Narrowness of their bid / offer spreads.
- Margin requirements. You will be required to deposit around 25% of the value of your bet to cover the broker against possible losses. This value will vary from firm to firm.
- Trading platform. Each company will have their own trading platform that runs in a browser like a regular web page. Some are easier to use than others. If the provider offers a spread betting demo account you can try out their platform.
- Level of customer support.
- Are they FSA registered? All legitimate firms will be. You can search for spread betting companies and check their disciplinary record (if there are any previous rulings against them) at the FSA website.
- What markets they offer access to.
- Do they offer advanced stop and limit facilities such as trailing stops and guaranteed stop orders?