• Speculation is obviously the number one use for spread betting
• But switched on, savvy investors and traders do use them for other purposes such as hedging risk and replicating the old 'Bed & Breakfast' type of tax-management trading that has been 'stopped' by the UK Treasury, or has it?

Flexibility of Markets

One of the main reasons why speculators love to use spread bets, apart from the tax-free advantage is the fact that they can speculate in almost any financial, commodity or currency market worldwide, within the one account.

Wake up one morning feeling bullish on the Pound or bearish on gold and you can take immediate action. But with a traditional stockbroker or even a futures trader this is often difficult because they won't be set-up for that kind of business. In effect you may find yourself having to open accounts with different brokers to trade different products.

Use Spread Bets To Play Small

The other advantage with Spread Bets is that even the small speculator who likes to trade for fun can use them to make dramatically smaller bets or trades than he would be allowed if trading the underlying cash or futures market.

Using gold as an example

• On the New York Comex market where the futures are traded a $1 move in gold equates to a $100 profit or loss on a futures contract
• But with a spread bet you can trade a 1/10th of this size if you so choose, or even risk 10 pence per point

A further advantage to spread bets which we have mentioned on previous pages is that they're excellent testing grounds for new ideas or even new traders who want to learn more about the game of speculation without risking a serious amount of money. And that is excellent long term advice: If you're new to the game of speculate and have £10k-£20k to play with it makes sense to trade with a fraction of this money while learning the ropes, before bringing the majority of the money into play.

A lot of money has been lost using margined products such as Spread Bets and CFDs because people simply did not fully understand either what they were doing, or the products they were trading in. The cry of 'if only I knew then what I knew now' is a common parting comment when a new trader closes his account due to losses after six months. Don't fall into this same trap, start small, make the small mistakes which everyone suffers and then increase your account size when you're more confident or your ability and the products you're playing in.