How to become a millionaire by spread betting

How to become a millionaire by spread betting.

By Manny Singh Sinder: August 2011
Being a leveraged product, your loss and gains are multiplied when you use spread betting platforms to trade the markets. Even though the risk to your capital is higher than it would be when buying stock and shares (in the normal sense), you are ‘not’ required to gamble with your entire capital (unless you want to) as you have the freedom to trade in very small quantities. In fact, your total loss can be limited to just £20 (or lower) if you use the ‘guaranteed stop’ or ‘trailing stop’ facilities. The best way to view spread betting is this: If you think a market will go a certain way (up or down), you are placing a bet in favour of your foresight. If you are right - you will make money.

Let us have a look at a example (figures used are for descriptive purpose only): War has broken out between country A and B; both are large crude oil exporters and you think the price of crude oil will rise as a consequence to the war. You place a bet of just £1 per point for crude oil to rise and use the guaranteed stop facility to restrict your loss to £20. The spread, which is the difference between the buy price and sell price, is £6, so the minute you press the buy option, your account will run at a deficit of -£6. Let us say the starting price was £100.00 - so until the price reaches £100.06, you will not begin to make any profit. The leverage in this system is the pence; each rise in price in pence makes you a pound and each drop in pence will lose you a pound or until your deposit of £20 has gone. As reports of a supply disruption filters through the media, the price rises to £120.80. This rise would equate to a £2074 profit (tax free). Since the leverage is in the pence, it is best to view the price without the decimal point (£10000 - £12080 = £2080 - £6 spread = £2074 profit). Needless to say, if you do not get it right, you will lose the same money you would have made.

Let us fast-forward the clock and assume you had opened a practice account with a respectable spread betting platform and you are now ready to take the plunge with a live trading account. You have realised you need to have at least one news channel displaying on your television screen most of the time along with a leading news website via the internet. You have noticed the markets fluctuate when financial reports are released on a daily basis and recognised how markets react during different times of the day and seasons. You sold you house for £300,000 and have decided to place a large bet in an attempt to make a cool million and buy your house back. This is how you ‘could’ do it.

First you will choose an acceptably volatile market like currencies and wait for the right moment or development. Let’s say some news comes in about a possible debt default from the Spanish economy and you think the news will have a massive impact on the Euro. You place a bet on the Euro to fall against the Dollar. You are feeling brave so you place a £5000 per point bet for the Euro to fall and use a 40 point guaranteed stop, which requires a £200,000 deposit (which you will lose if you are wrong). Thankfully you are right and the Euro drops from 142.30 (£14230 in spread betting terms) to £90.00 (£9000), making you a tax free profit of £26,150,000 (Twenty six million, one hundred and fifty thousand). Not bad!

Bearing in mind the current health of the world leading economies, I would not be surprised if the Euro did fall exactly like this, in fact, I am personally betting on it. Before you sell your house, give up your day job and take up spread betting for a living, believe me when I say this; ‘it is not as simple as you may think’. You will need to spend time and money in getting to know how the system works – not just the trading platforms but also the markets. Learning about chart indicators and candle sticks is a good place to start as there are plenty of articles and videos on the internet about this techinique. Most people become specialists in one particular product i.e. gold or silver and then branch out after a certain amount of success. The information to make this work correctly is vast but well worth the effort if you can get it right.

There are vast arrays of companies offering different spread betting platforms for all types of traders. Some have a reputation of price and chart manipulation for personal gain while other seems to operate on a ‘fairer’ level. Always do your homework on which platform would be better to use. It will be a wise decision to open at least two spread betting accounts so there is a comparison in different techniques. Always check prices against live feeds – and make sure you are not being cheated. Never gamble with money you cannot afford to lose.

To contact the author of this article, please email manny@sinder.co.uk

Disclaimer: This article is not presented as financial advice and is the opinion of the author only