How to spread bet

With spread betting, you can speculate on the price movement of thousands of shares, fx pairs, indices and more. Read this guide to learn how.

Want to get started right way? Open your spread betting account:

Spread betting steps

  1. Learn how spread betting works
    Understand how spread betting differs from other methods of trading the markets

  2. Open a spread betting account
    You’ll use your account to open positions, research new opportunities, add funds and more

  3. Choose a market
    Decide which market you want to trade on. You can get trading inspiration through our fundamental and technical analysis research portal

  4. Decide to buy or sell
    Click 'buy' if you think the price will increase in value or 'sell' if you think the price will fall in value

  5. Select your stake size
    Choose how many pounds per point you wish to stake. A stake of £5 means you will win or lose £5 for every point the market falls or rises in your favour

  6. Add a stop loss
    A stop loss is an order to close your position out at a certain price if it moves too far against you

  7. Execute your trade
    Once you've checked that you have sufficient funds to cover your margin, it's time to open your position 

  8. Monitor and close your trade
    You’ll see your profit/loss update in real time. To exit your trade, click the close trade button

Let’s take a closer look at each step. To follow along with this guide, open a spread betting demo.

1. Spread betting explained

Spread betting is a form of derivatives trading, meaning you take your position on financial markets without ever owning the underlying asset. But unlike other derivatives that work using contracts – such as futures, options and CFDs – spread betting works using bets>.

When you open a position, you’re betting a number of pounds per point (known as your stake size) that a financial market will either rise or fall. For every point it moves in that direction, you’ll earn your stake size as profit. For every point it moves against you, you’ll lose your stake size.

Say, for instance, that you bet £1 per point that the FTSE 100 (UK 100 on the City Index platform) will rise. If the index rises 100 points, you make £100. If it falls 100 points, you lose £100.

What is the spread? 

The spread is the difference between the buy and sell prices you’ll see listed on any financial market. These prices simply tell you how much you’ll pay to buy or sell this market now. Sometimes, you’ll see the sell referred to as the bid, and the buy as the offer.

Spread betting is commission free, so all the costs to open and close your position will be contained within the spread. There are, however, other trading costs to be aware of.

Take a look at the example below. The UK 100 sell price is 7500 and its buy price is 7501. The difference between the two is the spread: 1 point.

Buy sell Wall St 

Spread betting and leverage

Spread betting is leveraged, which means you don’t need to have the full value of your position in your account in order to trade. Instead, you just need a fraction of its value, known as your margin. To open a spread betting position worth £1000, for example, you might only need a balance of £200.

Your profit and loss will both be based on the full size of the trade though – in our example here, £1000. This has the effect of multiplying your profit and your loss, which can make spread betting risky.

So before you start trading, it’s always a good idea to make sure you understand how to manage your spread betting risk.

2. Choosing a spread betting account

Before you can place your first spread bet, you’ll need an account. You’ll use your account to find markets to trade, execute your orders and monitor your profit or loss.

Different accounts come with their own unique features and benefits. With City Index, for example, you get:

Open your live City Index account here.

Spread betting demo accounts

You can test drive a spread betting account risk free using a City Index demo. You’ll be able to trade our full range of markets with virtual funds, without committing any capital – so you can test out trading without paying a penny.

Learn more about City Index’s spread betting demo account.

CFD account vs spread betting

Not sure about spread betting? You can choose to open a CFD trading account instead. You’ll get access to the same range of markets – but instead of placing bets on them, you’ll trade contracts that mimic their underlying asset.

Each account comes with distinct advantages. Learn more about the difference between CFDs and spread betting.

3. Which spread betting markets can I trade?

With over 4000 spread betting markets to choose from across indices, shares, FX, commodities and more, picking a trading opportunity that's right for you is important.

There are lots of different ways to find new trades. You could, for example, take a purely fundamental approach – assessing which markets are undervalued or overvalued, then taking your position accordingly.

Or, you could use technical analysis to analyse price movements using patterns and indicators.

Whichever strategy you choose, you’ll find a huge range of research, tools and educational resources available with your City Index account to help you make the most of the markets.

4. Decide to buy or sell

Remember the buy and sell prices we covered earlier? With spread betting, you can choose to open your position using either of them. You’re not limited to buying at the outset and selling to close.

  • Buying gives you a long position – which earns a profit if the market moves up
  • Selling gives you a short position – which earns a profit if the market falls

Returning to our UK 100 example, if you want to bet that the Dow will rise, you buy the market. If you want to bet that it will fall, you sell it.

You can see the buy and sell prices for any market by bringing up an order ticket in the platform. You’ll also see the market’s current spread, so you know precisely how much you’ll pay to open your trade.

5. Setting your stake size in spread betting

Your stake size dictates how much you make or lose per point of movement in your chosen market.

For example, a stake of £5 means you make £5 for every point the market moves in your favour. Conversely, you lose £5 for every point the market moves against you.

A useful benefit of spread betting is that your profit or loss will always be in your chosen currency, regardless of the market you’re trading. You can bet pounds per point on all FX pairs, non-UK stocks, indices and commodities, all without worrying about converting capital.

Did you know?

Your stake size doesn’t have to be in pounds. You can choose your base currency when you open an account.

Stake sizes and the spread

Once you’ve chosen your stake, you can multiply it by the market’s spread to calculate how much you’ll pay to open your position. If the spread is 1.2 points and you’re betting £3 per point, you will in effect be paying £3.60 for the trade.

Stake sizes and margin

Spread betting is a leveraged product, which means you only need to have a fraction of a trade’s total value in your account to open it. The deposit you’ll need to keep in your account is known as your margin.

For example, say the UK 100 is trading at 7,501 and has a margin requirement of 5%. You want to bet £5 per point, giving you a total position size of (7,501 x £5) £37,505. But because spread betting is leveraged, you only need 5% of that in your account: £1,875.25.

The higher your stake, the more margin you’ll need in your account to place your trade. If you want to bet £10 per point, you’d need (5% of 7501 x 5) £3,750.5.

Price x stake x margin

You’ll need to ensure that you always have sufficient margin in your account to open trades. Learn more about how margin works in spread betting.

6. Managing your spread betting risk

Leverage is a powerful tool when trading, but it will also increase your risk – so having a strategy to manage that risk in place is hugely important. Let’s cover two useful tools for managing spread betting risks: stop-loss and limit orders.

What is a spread betting stop loss?

A stop loss order in spread betting is an instruction to close out a trade at a specified price that’s worse than the current market level. As the name suggests, it’s used to help minimise losses. Once a position hits a set level of loss, a stop will close it automatically.

stop order

City Index offers three different types of stop-loss orders:

  • A standard stop loss order, once triggered, closes the trade at the best available price – which might not be where you set your order if the market gaps
  • A guaranteed stop loss will always close your trade at your chosen level, even if the market gaps. You’ll pay a small premium to use a guaranteed stop
  • A trailing stop follows your market when it earns you profit, then ‘locks in’ if it moves against you. You can use them to manage risk without jeopardising potential profits

Adding limits in spread betting

A limit order  (also known as a take-profit order) is an instruction to close out a trade at a price that is better than the current market level. Limits don’t necessarily protect you from losses, but they are useful when setting profit targets.

Say that the UK 100 hits your profit target of 7,125 when you’re not monitoring the markets, then retraces back to 7,100. If you’d placed a limit at 7,125, your position would have automatically closed there – ensuring that you earn the profit.

limit order

Learn more about risk management.

7. Executing your spread bet

Once you’ve chosen your trade direction, stake size and stop/limit levels, you should be ready to open your position. You can do this via the deal ticket on our web or mobile trading platforms. Most orders execute in less than one second.

There are two main ways to open your position. Using a market order, or an order to open.

Market orders will execute at the best available price now. If you want to open your position at the market’s current price, they’re the simplest option.

If you want to execute your trade at a specified level instead of the current price, you can use an order to open. These work just like stops and limits, but they open positions instead of closing them.

8. How to monitor and close your spread bet

Your profit and loss will now fluctuate with each move in the market price. You can keep an eye on your trade in the ‘open positions’ section of your trading platform.

It’s worth monitoring all your open trades, even if you have stops and limits in place. That doesn’t have to mean sitting and watching price movements all day, though. You can use tools such as price alerts to get notified when your markets hit certain levels, or undergo high volatility.

Closing your trade

When you are ready to close your trade, you need bet in the opposite direction to when you opened it. If you bought at the outset, you’ll sell now.

Select the 'close position' option within the positions window. By closing the trade, your net open profit and loss will be realised and immediately reflected in your account cash balance.

This will be done for you if your stop loss or limit order is automatically triggered. Of course, if you manually close your position your stop loss will be cancelled.