Spread Betting – How To Get Poor Quickly?
While I type this, my head is a little sore and I have a drained wallet. I lost nearly PS30,000 in the last four week spread betting an hour per day, five days a weeks. I lost around PS1,500 per hour. This is a lot of money. It’s actually not as bad as it appears. Luckily, I was using the demo sites of a few spread betting companies. They are simulations that mimic their real-money betting sites. I know I’m not a financial genius, otherwise I would be rich by now. The fact that I lost so much money quickly raises the question: if spread betting is so simple, why are so many people wiped out so quickly?
Spread betting is becoming more common in investment and money management magazines. Four or five spread betting companies place full-page color ads every week in the publication I subscribe to. This is more than any other form of advertising. Many weekend newspapers already run ads for spread betting in their business section. Soon, they will also appear in personal finance sections. Many savers may find spread betting attractive. Money in the bank, shares, or unit trusts can only give us a measly five percent a year, before taxes. Spread betting is a great way to earn ten percent a week, or five hundred percent a year. Spread betting allows you to earn what would normally take 100 years or more with other investments.
Spreadbetters bet on the price movement of individual shares, currencies, commodities, or entire markets such as the FTSE or S&P.
Spread betting has many advantages over traditional investing.
- No need to purchase anything. You can bet on the price movement of shares, commodities and foreign exchange without purchasing any underlying assets.
- You don’t have to pay tax. When you sell shares, receive dividends, or get interest from a financial institution, you must pay taxes such as stamp duty, income tax, and capital gains tax. Spread betting is not taxed unless it is your only income and full-time occupation. It’s considered gaming canlı bahis siteleri.
- Spread betting can be used to go long or short. As long as you correctly guess the direction, you will gain equally if prices increase or decrease. You need to wait for the price of most investments to rise before you can make a profit.
- You may bet on a rise and a fall at the exact same time. For example, if the FTSE is trading between 5551-5552, then you can make two bets: one for FTSE to rise, the other that it falls. These are only triggered when FTSE moves. If it starts to go up, then your bet on it rising is triggered. If it falls, your only bet is activated. It may seem like you will win, rain or shine.
- Huge Leverage– If you wager PS50 per pip (a pip being the usual minimum price movement that you can bet), you could easily win up to four or five time your original bet, if the price moves the right way. You can win a lot more if you make a good bet.
- You could wait for the breakout – The prices of many commodities, shares, currencies and other items that people bet upon tend to go through periods of stability, followed by sudden movements up or down. Spread-betters refer to this as a ‘breakout’. You can make a bet which is only active when the breakout occurs.
- Loss Limits– If your bet is wrong, you can set conditions to prevent losses from exceeding the level that you have chosen.
- You may adjust your bet mid-flight. With many bets (such as horse racing and roulette), you must wait until the race is over or the croupier says “no more bets” before you can find out if you won. Spread betting allows you to close your wager at any time. If you are ahead, you may want to take your winnings. If you are behind, you may wish to cut your losses and wait for things change.
Spread betting has many of these characteristics, so it should be easy to earn a decent amount of money without putting in too much effort. If only.
According to industry estimates, around 90% of spread-betters will lose their entire investment or close their account within three months. Around eight percent of spread-betters make reasonable money regularly, and around two percent make fortunes. I’ve attended a few presentations by spread betting companies. At one of them, the salesman revealed that more than eighty percent of his clients lost money. Many professionals also lose six out of ten bets. By controlling their losses, and maximising the returns they receive when they win they can increase their wealth.
What can go horribly awry
Spread betting can be a powerful tool for destroying wealth.
- Companies want you to lose. When you open your first demo or real account you will receive several calls from friendly and helpful young people at the spread betting company, asking you if they can help you get started. Customer service at its best. The majority of people who contact you will say that they are happy to assist you and that their company makes money only from the spread. Some people will tell you they want you winning because the more money you make, the more spread betting companies will earn. It may make you feel better, convince you that they are open, honest and trustworthy, and encourage you use them to place your bets. It’s a lie. The company may make a large amount of money by using the spread. You’re betting against a company when you place many bets. They hope that you lose big. In the last month, I have seen a number of companies alter their terms and conditions to increase the likelihood that users will lose. Spread betting companies aren’t your friends. They win more the more you lose. It’s as simple as that.
- It is difficult to break even. If you bet PS50 per pip, and the price goes the way you desire, the spread betting firm will take the first PS50 that you win. The price must move in the desired direction by two pips to earn you your PS50 and three pips to double your money. If the price moves in the opposite direction by three pips, you will lose your initial bet plus PS50 per pip. This is a loss four times the original bet.
- Losses are often massive. With the majority of gambling, you only stand to lose what you wager on roulette, blackjack, or horse racing. Spread betting can lead to losses that are much greater than the amount you bet. I lost over PS800 on a single bet after forgetting to set a stop-loss. You can have both fantastic gains and painful losses because your bet has been leveraged. It’s too often the latter. Many bets are small, usually PS5 or PS10 per pip. This can give the illusion of security. They only realise that they are taking a risk when their losses reach five to tenfold the initial bet.