There are several factors that must be considered when choosing the best spread betting companies for your needs. With a cluttered market and a lot of investment capital on the line, distinguishing the sound spread betting companies from the unsound or unscrupulous ones can be difficult. Investors looking for spread betting companies should create a five-item checklist for their search: examining parlay policy, diversity of available markets, commission rates, average spread rates and whether automatic stop loss is available through a particular company.
Spread betting sounds complex, but in actuality it is fairly simple. Instead of purchasing a stock of shares in a company directly, a spread bet is a wager on the performance of that stock. Say, for example, that an investor thinks GM stock might rise a quarter of a point during the next trading day. Rather than purchasing GM stock with the purpose of making a profit off of the quarter point, the investor places a bet specifying that GM stock will rise a quarter of a point per share during the next trading session. This offers some distinct advantages to traditional stock investing.
Some spread betting companies offer investors the ability to roll over winnings for future transactions, which can be a way to exponentially increase the rate of return for your spread betting. Even if an investor is not interested in this feature initially, the potential ability is still something that should be sought after. Flexibility is always preferable in the long run of any investment strategy. Many firms will require investors to open a deposit account in order to take advantage of any rollovers.
The more popular spread betting companies will allow investors a wide range of markets. The available markets should include a mix of both U.S. and foreign exchange currencies and commodities. The wider variety that an investor has to work with, the better the odds of maximizing returns. Also, many of the popular spread betting companies do not charge commission fees for transactions as long as the investor opens and maintains a direct deposit account linked to an active checking or savings account.
The more generous the spreads, the more opportunity an investor has for realizing a profit. Spread betting companies that offer investors a two-point spread on Wall Street stocks and bonds provide the ideal spread betting environment for investors. When coupled with an automatic stop loss or computerized limitation service, an investor can create a series of data metrics that start, stop or roll over bets on particular markets, 24 hours a day.