Margin - how spread betters make (and lose) money fast

Successful spread betting can make you money far faster than simply buying, holding and selling shares. But the gearing that multiplies the profits can also lead to big, quick losses.

Successful spread betting can make you money far faster than simply buying, holding and selling the underlying securities, such as shares. That is because spread bets are 'geared', whereas share purchases are typically not. Here's a reminder about how this works and the consequences for your trading strategy.

Investors who stick to say trading shares make money if they pick the right ones. But they typically do so slowly and at relatively low risk. For example spend £10,000 on 1,000 shares at say £10 each and if they rise in price to £12, you make £2000 if you now sell (ignoring dealing costs and tax). So you've made a 20% profit. Had the deal gone wrong you could have lost a maximum of the full £10,000 invested up front but only if the share price had slumped to zero.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

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.