The Start

This blog is about spread trading (or spread betting). Spread trading platforms offer certain advantages for the small and medium trader over having an account with a broker to trade futures or options. The first is obviously size - you can open a modest account and trade small quantities without losing your shirt. This is crucial if you are just starting or are less than hyper-confident about what you're doing. The second advantage is that the spread betting industry has developed numerous contracts that just do not exist in the main futures markets. These generally have fallen under the name of binary bets and I'll discuss these in more detail elsewhere. These have meant that even professional brokers will sometimes have spread betting accounts on the side to make some extra money as binary bets can be very profitable.

In the UK, platforms such as IG Index and CMC are covered by both the Financial Services Act and the Gambling Commission. Currently any profits you make are free of either personal or capital tax. The FSA regulates the standard futures and options contracts, whereas the GC regulates the binary bets. Actually, the picture seems less than crystal clear as the FSA website gives a football binary bet example on their spread betting page. Anyway, if you're not a UK citizen then it is up to you to check your national legislation on this matter. The companies themselves have regulatory fees and taxes to pay and these will be included in your buy/sell spread.

All of which means that you can either trade the standard futures and options contracts, as you would with a broker, or you can use the various exotic binary bettting instruments, or, of course, a mixture of the two. I will mainly be looking at the binary bets as there is less written about them and, despite their apparent simplicity, there is the need for just as much analytical muscle as any trading instrument. A misunderstanding of how some of these instruments work can easily result in having a correct view of the underlying market and yet mysteriously losing money on the deal.

I will mainly focus on IG Index as a trading platform. Mainly because it is my primary account but also because they have developed the broadest range of binary betting instruments. There are other platforms and I may in the future broaden my comments to include these.

I will also be including trading strategies and only the future will tell whether these will do well. I am obviously opening myself up to potential ridicule but, well, if the analytical articles prove useful then my job has been half done and you can safely ignore my pitiful attempts at actually trading. But one of the most important trading tools is your own personal trading diary. Unless you are blessed with divine foresight, you are otherwise likely to forever be chasing the market's tail. Your diary will be a stark reminder of the walls you have banged your head against and all the Scyllas and Charybdises that have sunk your deposits. This is my version of a trading diary.

Abbandonate ogni speranza!

RM