The Naked Trader's Guide to Spread Betting

How to make money from shares in up or down markets

Robbie Burns

• Publisher: Harriman House
• Year: 2018
• ISBN:
  9780857197061
• Edition: 2
• Topic: Business
• Subtopic: Financial Accounting
• Index: Business

REVISED AND UPDATED 2ND EDITION OF THE NO.1 BESTSELLER!Have you dabbled in shares or the stock market? And wondered what spread betting was all about and whether you should be doing it? Perhaps you thought it all looked a bit complex or was just for City boys? The no. 1 bestselling beginner's guide that explains - in plain English - how to do it, and how to make money from it, is back and better than ever!Spread betting shares can be dangerous: most people lose - some even lose their shirts. But it's not a world populated by pinstriped men waiting to rob you, steal your savings and do nasty things to small kittens. You can win. (And you never have to pay a penny in tax!) This book shows you how.Robbie Burns, bestselling author of The Naked Trader and Trade Like a Shark, has been spread betting for years. He explains why it's an indispensable tool to use alongside normal investing or trading. Especially as you can make money even if the market goes down.Robbie takes you through everything from how it works, to managing your risk, working out exposure, and how, often, doing nothing is the best move!He explains the ins and outs of successfully betting on shares in his trademark down-to-earth style, covering all you need to know. From the simple stuff through to proven strategies, including those that can be used in different markets - it's all here. There are also tons of real-life trading examples from his own account.But it's a big, bad old world out there, and there are a whole heap of mistakes you can make, an awful lot of money you can lose. Rounding up spine-chilling traders' tales of spread bets gone wrong, and using all he has learnt from making silly mistakes himself, Robbie also helps you learn what NOT to do.This is the ultimate guide to spread betting - how to do it, have fun and hopefully make a few quid. You can't afford to spread bet without it!

Part I: Learning It

1. What it is – and Whether it’s For You

What actually is a spread bet?

There is one thing you must understand before you start spread betting and that is:

You are not investing by buying real shares in a market. You are BETTING, and you are betting with what, in effect, is a bookmaker!

When you buy or sell anything with a spread betting company YOU DON’T OWN A SINGLE SHARE personally. Though you do get the dividends (well, cash of the same amount). The bookmaker may buy the share and, if so, it will own it. You won’t.

You are betting on whether a share price is going to go up or down. And it is so easy. With one click you can be making, or losing, money.

Generally speaking, unlike, say, a normal bookie – which takes your bets on the horses and makes money from you losing – the really good thing about spread betting companies is: they won’t shut you down if you win.

If you start winning a lot on the horses, for example, you’ll probably find your account shut down because you are costing the bookie money. But with a financial spread bet, the bookie still makes money off you even if you win a lot! You can win millions and they won’t bat an eyelid. I have made many hundreds of thousands of pounds from spread betting and I’ve never been shut down. They just make a small cut of each of my bets.

They are happy and I am happy.

That’s because, unlike a normal bookie, it is not necessarily you versus the spread betting firm. The ‘bookie’ in this case can easily earn money from every trade you make, whether it’s a winner or a loser. So the spread bet firm just wants you to trade.

How is that possible?

Dead easy. Now, like I said, this book expects you to at least be familiar with the basic concepts of shares. So you’ll have looked up prices before and you’ll know that when you do so there are always two prices for every share in the market:

• the offer (the price at which you can buy)
• the bid (the price at which you can sell)

Example of a share price with bid and offer quotes (on ADVFN)

You’ll also have noticed that there’s always a gap between these. Sometimes a few pence. Sometimes a hell of a lot of pence (on smaller shares). For example, a FTSE 100 share’s offer price (buy price) might be 314p. But its bid price (sell price) would not be 314p. It would be, say, 312p.

This gap between the sell price and the buy price is called the spread. And that’s why it’s called spread betting! A spread betting firm makes money on the spread it charges you – the difference between the buy and sell price. Its spread is usually slightly larger than in your ISA share dealing account because of this, but the difference is never enormous.

But not only are spread betting firms perfectly happy with you winning tons of money… best of all, there is no tax to pay on those winnings!

If you make a mint you can keep it! No sleazy politician can get his or her paws on your winnings. Although, of course, like those irritating ads say, tax laws can change, and it’s possible they could tax spread betting in the future. But they don’t at the moment, so enjoy.

Is it right for you?

Well, before we start sticking on trades, I should say this book is not only intended to help you learn how to spread bet – but also intended to help you decide whether to try spread betting or not. Part of the book is intended to put you off as much as make you see the advantages of doing it.

I’m independent: it doesn’t bother me whether you spread bet or not. But like a friend I want to guide you through the many pitfalls and show you the potential of running into trouble with it. While I think any sensible trader should use it, not everyone has it in them to be a sensible trader.

Some people (like me) run their accounts happily over the years, making money tax-free. But some find it all goes wrong and they lose it. And all their money.

You need to be aware of this.

I reckon the reason a lot of people are scared about trying spread betting is simply that the word ‘betting’ is in there. But frankly, if you have a standard portfolio in the standard stock market that is already a kind of bet. Any trade made by any means in the market is a bet on something – a company, or a collection of companies, doing well or badly. The key thing is not to let the presence of the word ‘betting’ in the name of the activity lull you into approaching your spread betting account as if it was a fruit machine.

Indeed, I think we can change our spread betting accounts into something much more like an investment account – a spreadISA – with a few simple adaptations. But, though I enjoy spread betting and make money from it, it is time for a WARNING WARNING WARNING (lots more warnings coming in this book, I warn you).

WARNING: Are you the right sort of person to spread bet?

Without wanting to sound old fartish about this… [You old fart! – Ed] R...