Choosing the right market for you is vital to ensure you’re comfortable with how much to bet and how it fits into your lifestyle.
We look at some of the major factors to consider below.
Choosing a market you feel confident dealing with is a key part of your spread betting preparation
Focus on your interests
When you start spread betting it’s generally advisable to focus your attention on markets that you have a particular interest in or knowledge of.
For example, if you keep up with the latest trends in the technology sector, then you’re more likely to have a relevant store of information that can be applied to spread betting on stocks in that industry. This would be more logical than betting on the price of oil if you have no prior knowledge of what drives commodities markets.
Do your research
When choosing a market, it’s also crucial to consider these factors:
- Dealing times – When is the market open? Are you free to deal at those times? Will you be able to react to any big price swings?
- Volatility – On average, how many points does this market move in an hour/day/week? Are you comfortable with that range?
- Costs – What is the spread, minimum position size and margin requirement for this market? Can you afford to deal on it, and how much will you gain or lose for every point of movement in the price?
You should also take into account the following information on the four major asset classes. If your chosen market doesn’t fit with how you want to deal or your attitude to risk, then you should choose one that is more suitable.
You can only bet on shares during the opening hours of the stock exchange where they are listed (unless your provider offers out-of-hours markets). It’s also worth bearing in mind that, while share prices can stay relatively stable for months at a time, they can also move rapidly, and are especially volatile before or after a company announces its earnings.
Spread betting on stock indices might be suitable if you want to deal on the performance of a range of shares, as this can reduce the risk of betting on a single company. Because indices are made up of so many stocks, their value tends to be continually shifting and so could be even more volatile than individual shares.
Due to the sheer volume of currency dealers and the amount of money exchanged, forex markets are generally the most volatile. While this can provide an opportunity for large profits, it also increases your exposure to risk if the market moves against you. FX dealing also takes place around the clock, so you’ll need to bear in mind that significant price moves can occur while you’re asleep, or unable to access your spread betting platform.
As the production and consumption of commodities relies on so many different factors, their prices are known to fluctuate significantly. This makes them a popular market to spread bet on due to the opportunity to make money but, like forex, volatility brings increased risks.
Keep up to date
Once you’ve made a decision, make sure you continue to watch out for any news or developments that could affect your market. This will increase your chances of predicting future movements, and help to ensure you don’t get caught out by any nasty surprises.
Subscribe to 'The week ahead' newsletter
Ready to put theory into practice?
Try a spread betting platform with £10,000 virtual funds. Remember, losses can exceed deposits.