Brokers: choosing the right one for you
A guide to spread betting brokers
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There are now several brokers that provide financial spread betting. However, deciding on which one to open an account with can be daunting if you are new to spread betting. Here are a number of useful points to bear in mind as you make your decision.
Consider the spread: the costs associated with financial spread betting are included in the spread so you need to ensure that the spread betting provider that you choose offers favourable spreads. Do your homework because some companies advertise great spreads for particular popular markets without mentioning anything about other markets that they cover. What you want is a company that has tight spreads across the board. Remember, the wider the spread, the more you pay to trade.
Online trading is hard enough without losing money on wide spreads.
Price fill and slippage: do you get a different dealing price to the one originally quoted, or do your orders get filled at a better or worse price? While it is worth watching out for any differences in quoted prices and actually prices at which your trade is placed, this is not generally an area that raises big concerns since spread betting brokers typically hedge most trades in the market, thus retaining a broadly risk-neutral position. Their profit comes from the spread as discussed above and as such, it is in their interest to maintain a large user base. For this reason, they generally want to see you survive in the markets over the long term to earn them recurring profits through the spreads that you incur in your transactions.
Trading platform: ease of use of trading platform, need for complicated downloads or simple web interface?
Range of markets covered: some firms only cover a handful of markets. While this may not necessarily be a problem (in fact, a limited number of markets may be a blessing in disguise for a novice trader,since it helps to focus), it pays to know that there is a wide range of potential trading opportunities.
Availability (opportunity to trade at any time): can you trade at any time of the day to suit you? Some brokers now offer the possibility of round-the clock online trading. While you may not want to trade 24 hours a day, it may be very useful to be able to place a trade that you have researched in the evening. This provides a major advantage over traditional share trading where traders who make trading decisions at
the end of the trading day on the basis of the daily closing price have to wait till the markets open again the following morning in order to place a trade.
Options for making the transaction: can you trade by phone as well as online? With the wide range of companies offering online trading platforms for spread betting, there is no reason why you should not go for the one that offers you the greatest convenience. Some brokers now offer a combination of online trading, ability to place trades over the phone and others even offer portable hand-held devices for
monitoring your trades.
Click here for our A-Z list of spread betting firms operating in the UK.
Now you know what to look for when comparing spread betting brokers