How to pick a spread-betting broker
As spread betting has become more and more popular so the number of brokers to choose from has exploded. But how do you know which is the right one for you? Tim Benntt outlines four criteria to help you decide.
First, the good news. As spread betting has become more and more popular, so the number of brokers to choose from has exploded. But that comes with its own headache how to pick the right one for you. Here are four criteria to help you decide.
Range of services
What do you want to trade? If you are only interested in relatively straightforward equity bets, then most brokers will be fine. However, if your interest is more exotic house price bets, exotic currencies, sports bets or commodities, for example - then your options may narrow.
Equally, you may have an existing share trading account with a broker, and be just as happy to open a derivatives account with them too. But, given you can set up the two accounts with different brokers easily and quickly enough, make sure you do some homework (below) before committing.
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Costs
Although spread betters don't usually pay commission, bid-to-offer spreads vary. This is especially true for less popular trades. So always ask about spreads on your favourite trades, and ask about the extra cost (how far the spread moves) if you want to set up guaranteed stop loss orders to limit the damage from a duff trade. Also, find out whether your broker gives any extra concessions for regular trades, as opposed to sporadic bets, and decide whether you'll be able to take advantage.
Trading platform
Do you want to be able to trade from a mobile phone? If so, check how this works before signing up. Also, make sure the broker offers a demo platform for the market you are interested in so that you can practise betting before going live. If you plan to use phone deals (rather than sending orders in electronically) try the dealing desk a couple of times before signing up, and check that you can get a fast response when you are ready to trade.
Range of bets
Do you fancy placing binary bets (fixed odds, in effect) as well as conventional bets? Will you need more than just the basic limit, market and stop order types? Or are you always likely to be a 'plain vanilla' spread better?
Sure there's nothing to stop you starting with one broker and switching to another later. But given we generally don't switch (whether it's utility companies, banks or brokers), better to spend some time getting your choice right at the start. See our comparison table here.
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Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.
He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.
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