Spread betting is derivative trading that allows investors to predict the movement of the financial market. For CFD trading, the spread betting is done online by brokers who can pave the way to different markets through trading platforms. Though CFD and spread betting sounds similar, there are clear differences between these two. Spread betting offers unique advantages not present in CFD trading.
With financial spread betting, the trader speculates on the movement of the underlying asset, whether it rises or falls. As for CFD trading, traders tend to buy or sell shares or currency and bet on the movement of the market. Spread betting is open to different financial markets including commodities, forex trading, indices, shares, etc. This doubles your opportunity to earn and achieve continuous trading success. Also, if you want to maximize the advantages that you can get in spread betting, you should consider using a good trading platform like MetaTrader 4. Here are some advantages of spread betting that can look up in case you still have doubts.
Advantages of Spread Betting
Spread betting is Tax-Free
Spread betting is free from tax including capital gains tax. This is considered one of the most liked the advantages of this investing method. For instance, if you trade on shares, the capital gains tax will be deducted from your profits you earned. Therefore, the money you pocketed will be reduced at the end of the trading day. But if you choose to spread bet on shares, there will be no deductions for the capital gains tax.
No Stamp Duty Needed For Spread betting
Aside from the tax-free profit that you will earn on spread betting, you also won’t be required to pay for the stamp duty. Since spread betting is derivative trading, the investors here do not own the underlying asset which means that stamp duty is not required. With the stamp duty and the capital gains tax, there will be a lesser financial cost. Nonetheless, spread betting is cost-effective and offers cheaper deals compared to other forms of investment.
Spread Betting Requires Small Initial Deposit
Since it is a leveraged product, traders will only be required to pay a small deposit at the start of the trade. As for margin trading, the investors will need to come up with a small deposit amount while the rest of the amount will be paid as a form of a loan. The deposit which was paid to the broker will be your means to open positions. Using leverage on spread betting will create greater access because there will be no barrier with regards to the capital.
Wide Range of Market in Spread Betting
Using one trading account, spread betting allows its traders to invest in a huge number of financial instruments including shares, ETFs, Forex trading, bonds, indices, commodities, and others, which increases trading opportunities.
Spread Betting Uses Risk Management Tools
To further prove that spread betting is a very favorable trading option, this investing method offers a risk management tool that can help you lower the chance of incurring losses, especially for newbies. When spread betting, traders are allowed to use risk management tools such as partial-position closing and stop-loss orders as well as a good trading platform like MetaTrader 4.