Is spread betting for me?

Spread betting is short-term, high-risk investing - you can win big profits and incur equally large losses. It isn't for everyone so how do you know whether it's for you? Tim Bennett lists the three questions you should ask yourself before you try your hand at spread betting.

Markets are pretty volatile just now. And that opens up opportunities for spread betters and other traders. But for someone who has always invested in stocks and shares, is it worth making the leap into a new way of trading? Here are three things to think about before deciding whether to take the plunge.

Am I a short-term trader or long-term investor? Investing is all about spotting shares that are cheap right now and also a solid bet over afive to 50-year time horizon (US investor Warren Buffett once quipped that his preferred holding period was "forever"). Spread betting on the other hand is about seeing the opportunity to make a quick buck and repeating similar trades many times over to make a profit. These are fundamentally different approaches that require very different mindsets. Of course it's possible to spread trade purely for fun too but at that point your odds of making money are about the same as someone taking a punt on the horses. Serious spread betting involves more commitment in some ways than serious investing.

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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.