Have you been interested in all the talk of margined trading with spread betting? Do you want to know more about what it is? Margined trading is in fact where the investor will borrow money from the broker. The investor will then put down money and be able to buy twice the amount of the cash down. This is the margin. Note that margined trading is very risky.
How does margined trading work with financial spread betting? Basically your own margin is a deposit that you make in order to cover potential losses if you are making your bet. Different companies will demand different margin sizes when spread betting and the quantity will depend on the amount that you bet : the larger your bet, the larger your own potential losses and so the larger your own margin. This serves to protect the organization with whom you are placing your own bet, as well as ensuring that you enter a bet with the right mind-frame – you’re not just risking the amount of your ‘buy’, but the entire amount of your margin if you lose your own bet.
With margined trading the particular margin is calculated according to the value of the bet and the percentage perimeter required by the spread betting company. In order to work out your margin you take the quoted share price in pennies, multiply it by your wager amount in pounds and then multiply it by your company’s percentage perimeter requirements. The margin is typically very large in comparison with the size of your bet whenever spread betting so this is not a great investment for those with very little cash.
However, you are only paying a small percentage of the value of the bet which allows you to create great leverage and possibly make a lot of money from little confirmed capital outlay. If your spread wagering is not going too well then you will probably find yourself getting a ‘margin call’.
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Within margined trading, a margin call is when your margin is starting to look insufficient to pay your loss. In this instance you will be faced with the option to either add more funds to your account, or close your position – if you wait too long the company will be forced to close it for you.
When you consider a bet, if you can negotiate a “stop loss” as low as possible then it may help you. Using as little margin as possible is also a smart step. The key basic principle with spread betting is to increase your successes and minimize your losses, if at all possible, at the same time. Usually this can involve a careful analysis associated with both, taking into account the risk/reward percentage of your particular bet. Without this particular level of thought, financial spread gambling is a sure fire way to lose money rather than make it.