Spread betting is a becoming a more popular way to make money, but many people have not even heard of it yet. Whether you are an investor or not, chances are that spread betting isn’t a familiar concept even if you have heard of the term.
This post is not going to stop at explanation, though. Instead, it is intended to show that spread betting is a legitimate form of investment, rather than just communicating theory. To succeed at spread betting with a broker like ETX Capital, a user will have to increase their knowledge about stocks, indices, commodities, Forex, and more. More than any other investment form, spread betting is leveraged by knowledge and insight. Here’s how it works.
How Spread Betting Works
The concept really couldn’t be more simple. The user tries to predict if a specific commodity, stock, etc. is going to increase or decrease in price by the end of a given period of time.
We make guesses and estimations about this sort of thing every day. You might wait to buy chicken at the market on Tuesday because you think it will go on sale on Friday. Spread betting is no different, except that you put money on the line. Let’s look at a practical example.
Let’s say you are knowledgeable about the price of gold. You have owned gold for decades. You regularly watch the market and have a firm grasp about how national and international events, cultural forces, and economic trends affect the price of gold. You can’t guess its future value perfectly, but you can generally make solid predictions, certainly better than most other people.
With spread betting, you put this knowledge to the test. When setting up a contract with a spread betting broker, you’ll decide to risk a certain amount of money that the price of gold will be higher at the end of seven days than it is now.
Once you’ve agreed, your money is locked in. You watch the price go up and down in the following days, but you are only worried about the last day on the counter. On the second to last day, the price of gold starts to rise significantly, just as you thought it would (perhaps because you knew that a banking scandal was about to unfold in the media).
When the time is called, you collect your original deposit back, as well as extra earnings in proportion to the amount which the price of gold exceeded benchmarks (Bid and Ask Prices) established at the beginning of the contract. If the price of gold were to have dropped, you would have lost your deposit, but fortunately, you made an educated decision and it paid off.
How to Turn Spread Betting Into a Second Income
Spread betting becomes a second income when you learn to make these kind of successful decisions on a regular basis. Once you’ve initiated a contract, there is no maintenance that needs to happen. Whether you win or lose is an entirely passive occasion at this point. Therefore, you can do spread betting at work, while you sleep, and during your free time.
With experience and increased knowledge about how the world works with regard to your favorite stocks, Forex, etc., you’ll become able to predict upcoming sales trends with regularity. With regularity comes the ability to trust in a steady amount of income from this pastime. Gradually, your successes with far outnumber your failures and you will have created a legitimate income source that you can practice for the rest of your life. Start a free trial account today to see how you do!