You see the TV news every night. And every night they rattle through the state of the economy and the way the markets have moved: “Today the FTSE closed down 66 points at 6,656; the pound closed three points lower against the dollar at $1.57 and at 1.26 against the euro – meaning a euro is now worth 79p”. Yawn.
Let’s be honest, it’s a fairly dull fare. Or at least it is until you start to take it seriously. What if you were trading on those markets and a 66-point swing meant a £660 profit, or a £6,600 pay off? Wouldn’t that make it just a little bit more interesting?
The politicians would say that we all have a stake in those numbers, but politics is even less of an attention grabber than macro-economics so let’s take a different tack.
Making sense of those numbers and making them irresistibly interesting is the growing trend for financial spread betting (FSB). In a nutshell, FSB lets you bet on the way the markets move. But it’s a much faster, more interactive form of investment than simply putting your money down and waiting for the news to tell you how the day has gone. FSB trades are typically completed in a matter of minutes. It’s a hands-on trading experience that has far more in common with the intense, hyper-tuned environment of Wall Street than it has with conventional gambling.
A good example of just how sophisticated and how slick FSB is, and just how much information is required to trade successfully, is to be found at Tradefair. This is the trading arm of worldwide spread betting specialists Betfair and, as such, it offers the luxury of the very latest informatics, security and trading software among plenty of alternative specialists in the betting market.
A simple download provides a comprehensive trading desktop, complete with charts showing price moves over a range of different timescales and a wealth of ancillary information. What is more, there are more than 3,200 different market trading opportunities. That means that if the FTSE of the state of the pound are not your bag, but the price of a particular stock is, then you can trade purely on that. In effect, you can make your own bets focussed purely on your own areas of particular intelligence.
The way it works is deceptively simple. For all the financial jargon of bulls and bears and stops and hedges, all you do, once you’ve decided which stock or currency you are interested in, is decide whether you think it is going to go up or down. That’s really all there is to it.
If the market moves as you predict, you win. If it doesn’t, you lose. It could hardly be simpler.
And it is that fundamental simplicity that is driving the surge in interest in FSB. The spread betting element describes the way that your return is proportional to each point that the market moves. For example, if you bet £10 a point on the FTSE to fall, you would be the person cashing in that £660 at the end of the day. But you do need to know what you’re doing. If you’d got it wrong and backed the FTSE to rise, and it still fell by those 66 points, you’d instead be looking at a £660 loss. As it says in the small print, you can lose just as much as you can win. That’s why trades tend to be so short. Cutting your losses is part of the game.
FSB can produce incredible returns, but it can be equally costly if it goes wrong. It is most certainly not for the faint hearted, but if you do decide to give it a whirl you will unquestionably discover that it makes those numbers at the end of the news bulletins a heck of a lot more interesting.