Spread Betting is a financial derivative that allows Irish investors to place bets on financial markets without owning the underlying. They offer an exciting but riskier alternative to conventional stock trading and profits are tax-free! Spread betting enables people to bet on currencies, indices, shares, commodities and cryptocurrencies.
Example of How it Works
If you think the market will go up, place a buy bet or go long. However if you believe the market will fall, then place a sell bet or go short. The difference between the buy and sell price is known as the spread. With spread betting, you don’t buy or sell a number of shares or contracts, instead you bet an amount per point movement. For example you can bet €5 per point on the FTSE 100. If you place a buy bet at €7,000 and it rises to €7,015, that’s a €75 profit. When traders place a bet, they don’t need to put up the full value of the position, just a deposit, this is known as margin. Trading on margin means there is no stamp duty and no capital gains tax on earnings.
Spread Betting Tips
- Educate yourself before you start trading with real money. Paper trading is ideal for beginners to learn the basics of placing trades and helps build up confidence.
- Don’t get greedy and use too much leverage. As Charlie Munger once said, the fastest way to go broke is liquor, ladies and leverage.
- Develop strong risky management skills and cut losses quickly. Don’t hold onto losing positions in the hope of making your money back. This is the number one reason beginners suffer large losses.
- Sign up with a reliable broker who won’t screw over customers to make extra commissions.
Best Spread Betting Platforms in Ireland
Finding a suitable Irish brokerage is tricky because there are so many firms to choose from. Basically, you require a broker that offer tight spreads, don’t take the other sides of clients trades, have a solid platform and great customer service. Reputable brokerages I recommend researching include ETX Capital, City Index, CMC Markets and IG.
- Less money is required in comparison to for stock trading where you need significantly more capital to make similar profits.
- Ability to short sell – margin allows traders to profit when the price of financial instruments decline.
- Speculate on a wide range of markets – bet on gold or currency pairs.
- 24 hour trading – for example the Forex market is open 24 hours every day! Stock markets are open about eight half hours and close at the weekend. The ISEQ opens at 8 am and closes at 4:30 pm.
- Profits are tax-free and no stamp duty is charged.
- Traders can lose more money than they deposit into their brokerage account, meaning they end up owing money to the broker. This happens when people trade with too much leverage. The former Irish billionaire, Sean Quinn lost €2.4 billion using CFD’s to buy a stake in Anglo Irish Bank.
- Leverage is dangerous, I’ve read dozens of horror stories online of people losing thousands due to the inappropriate use of leverage.
- Not ideal for long-term investors as spread bets are normally held for a few hours or days.