Some people take their recreation more seriously than others. For most of us, having a good time costs money. But some people like to make their playtime pay. Financial spread betting (FSB) is an increasingly popular way to do exactly that.
In sum, FSB offers the same highly-charged balance of risk and reward that professionalWall Street traders enjoy but it does so with all the ease and affordability of a computer game. It is a growing trend that combines the serious potential for financial impact with a short-term excitement which is the psychological foundation of the gaming industry.
FSB is enabled by digital and smartphone technologies that bring the world’s stock and currency markets to life. It allows players to bet in real-time on the movements of those stocks and to generate real – and really substantial – returns. In effect, the world’s trading floors are rendered as a plaything, albeit a plaything which involves all the thrills and spills of a night at the casino.
But unlike a casino, FSB is more about judgement than luck. Because what is being bet on are real,commercial enterprises and real currencies, there is scope to research the conditions and market potentials from all sides. If keeping up with the news and watching the markets are your idea of fun, FSB is the perfect way to translate that interest into something more substantial.At a time when interest rates around the world are suppressed, the thought of bucking the trend is doubly appealing.
FSB is a derivative-based concept that derives from what professional traders know as Contracts for Difference. Stripped down to its basics, that means rather than actually buying a stock a trader bets against its movement in the market. The ‘difference’ is the discrepancy between the price of the stock at the start of the trade and at its close. If you bet on the price rising and it does so, you win. If it doesn’t, you lose.
What makes FSB so popular is the potential for rapid fluctuations in the market to generate instant profits. The player’s initial stake represents an open-ended commitment that is pegged to the market price of the stock. In other words, if the stock moves by ten points in the direction predicted by the player he/she will win ten times their stake. Conversely, and this is where things get tense, if the market moves the other way, they stand to lose as many times their stake as the market moves.
Clearly such an open position needs to be monitored closely. It is in micro-managing this open position that FSB investors get their buzz.
Impressively comprehensive trading desktopstypically display live fluctuations in thousands of markets. Once a bet is placed, watching the price (and the win/loss equation) fluctuate becomes a compelling and nail-biting experience. FSB offers a highly charged environment as well as an examination of market insight.
The potential to profit is balanced at all points by the risk of a negative return. However, low cost, immediate access and real-time trading 24 hours a day offer a compelling proposition irrespective of any financial implication. The demo version available online at Tradefair is a particularly good taster for what FSB has to offer.
For the more serious player, the real cash option is even more compelling. What is more, notwithstanding the ability to trade in small multiples,the absence of any fees or tax liabilities makes FSB something more than an amusing pastime. There are full-time private investors who target FSB for precisely these sound financial reasons.
As a way to play, FSB has much to offer. The requirement for research makes it endlessly absorbing, just as the fast-twitch nature of market movements makes it dramatically exciting. And it comes with some particularly meaningful strings attached. Not only is it a fun way to play, it offers a unique potential to make that play deliver a handsome dividend.