Don’t lose your shirt on spread betting and CFDs

Spread betting is popular because it offers an easy way to go short and to use leverage. But it’s also easy to run up large losses, says Mischa Frankl-Duval.

Almost 100,000 people placed a spread bet in the UK last year. Not only did that make this the UK's most popular trading method, it also made the UK the world's largest spread-betting market.

Spread betting is popular because it offers an easy way to go short (bet on falling prices) and to use leverage (trading with borrowed money in the hope of earning higher returns). However, while it can be a useful tool if you're experienced enough, it's also easy to run up large losses. To see why, let's take a look at an example.

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Mischa graduated from New College, Oxford in 2014 with a BA in English Language and Literature. He joined MoneyWeek as an editor in 2014, and has worked on many of MoneyWeek’s financial newsletters. He also writes for MoneyWeek magazine and MoneyWeek.com.