Spread betting can be a good alternative, but isn't available to residents of all countries
Find out here how this trader made millions in the stock market. All verified record!
When it comes to spread betting brokers, you can bet on many financial instruments and commodities with as little as $20!
Spread betting explained
These kinds of accounts are popular outside of the United States. The UK is one of the hot spots for spread betting, although international traders also take advantage of these online trading accounts. There are some restrictions. Some countries, including the Land of the Free, ban these online trading vehicles.
Spread betting involves betting on change in a price of a financial instrument (stock, index), currency (dollar, yen), commodity (oil, gold, agricultural), and other things. If you trade currencies, for example, you may bet as little as $1 for each pip (a pip on a dollar is 1/100th of a cent). Then, you determine how much you’re willing to lose by putting a stop order. If you gain 10 pips, you make $10. So, if you bet $10 on a pip and make 10 pips, you gain $100.
In many ways spread betting replicates currency trading, and you need to check whether there are charges related to the cost of carry. With cost of carry, you may get extra money posted into your account, or have it taken away once you hold your forex trade open over the night. Whether you get or pay money will depend on a difference in interest rates in the currency pair you hold.
So if you borrowed dollars to buy Swiss francs, you will pay an interest rate based on the dollar (remember it is a leveraged trade), and get an interest rate based on the franc. If, overall, franc pays more than a dollar, you’ll get paid (and vice versa).
Related articles on this site: