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What is Spread Betting and How Does it Work

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What is Spread Betting and How Does it Work

Anyone who bets only on fixed-odds might well ask: what is spread betting, and how does it work? Here we examine some pros and cons; discuss the leverage and margin in spread betting; take a look at how important risk management in spread betting is; and introduce certain features. We also provide a typical example of a spread bet to give greater understanding.

1. What is Spread Betting

Spread betting continues to grow in popularity and is a valid alternative to traditional gambling on things such as fixed-odds. A comprehensive guide to spread betting will undoubtedly introduce new players to the finer points, but basically a 'spread' is the difference between a 'buying' and 'selling' price of a specific event, set by a particular brand and that variation is what all betting markets will be based upon.

This form of betting focuses less on the win or lose scenario, and concentrates more on the working parts of the event, giving the bettor a greater opportunity to use their acquired knowledge and capitalise on more in-depth accuracy of a prediction. Leverage and margin in spread betting play a big role. They give punters the chance to significantly increase winnings, but there are risks attached too, as this form of bet also carries with it the prospect of greater losses.

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2. How Does Spread Betting Work

The appeal of spread betting comes with the ability to bet on both sides of an outcome. A bookmaker sets a market, which can be intuitive, or quite complex. Fundamentally, the nearer to being 'correct' in a bet placed, the more in returns can be expected.

Some of the great benefits of spread betting are how it rewards perception and judgement. Players can bet on all kinds of sports, entertainment, financial markets, more or less anything that can have an outcome one way or another; but here the winning chances are evened-up.

It is more about the actual result, so whilst the favourite may come out on top in a contest, it is still possible to bet against them and still win if the margin is below that set in the spread. This form of betting highlights the limitations that exist, but are probably not appreciated, in traditional betting practices.

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3. Pros and Cons of Spread Betting

As with anything, there are pros and cons to spread betting. There is no doubt that winnings can be exceptional if prior knowledge is put to good use. A bookmaker may well have set a spread that can be identified as being overly generous, and a shrewd punter can profit massively. It provides so much more flexibility to betting, but equally, it can be very tempting to risk money on a market where the knowledge-base is limited, and this can result in a painful lesson.

Spread betting sheets or betting trackers are very useful, as is the deposit margin, which is effectively created to ensure sufficient funds are maintained in an account to cover potential heavy losses. [bT]hese tend to be between 5% and 25% of the value of a bet, depending upon its volatility[/b].

Also, leverage in spread betting allows some speculation beyond initial deposit limits. Spread betting can quickly spiral out of control, hence the requirement for a larger balance than any profit/loss on any one bet. If several bets are in play at any one time, it can result in a necessity to add substantial funds.

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4. Long vs Short Spread Betting

In many ways spread betting is a slightly more sophisticated way of gambling, particularly in financial markets and speculating on movement. Placing a bet on a sporting event following this process allows for various eventualities, such as numbers of goals in football, or distance in lengths a horse might win a race, or the number of runs that will be scored in a specific period of a game of cricket.

A bettor would wager against the 'spread' which would require a decision on whether the spread betting firm has predicted too high or too low, and this is known as long and short spread betting. There will be two prices, given the names 'bid' and 'offer' and the punter has the option to 'buy' or 'sell'.

If the thought is that a team or individual will do better than predicted then the thing to do is buy the offer and this is referred to as long spread betting. If, however, the feeling is the prediction is too generous and the result will be considerably worse, then a player would sell at bid price, which is otherwise known as short spread betting.

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5. Spread Betting Risk Management

No form of gambling is without risk, but the amount involved in spread betting is entirely down to the individual. One of the major differences between this and fixed-odds betting is the potential to lose more than the initial stake wagered. Of course there is the theory of risk and reward, but it really is wise to understand exactly what are the risks of spread betting before committing too much to it.

With that in mind, it is always best to start with very small stakes. Granted, this will only lead to small profits, but equally it guards against heavy losses, before fully appreciating the finer points of this form of betting. Having a maximum loss limit will be beneficial, as will be selecting the right markets and being fully aware of the volatility within them.

Taking into consideration the high and low points of the spread and calculating the worst case scenario, will allow for an understanding developing of the true value of the stake and potential losses. If a bet is clearly going the wrong way, a player should be able to make the judgment call to cut their losses, before too much damage is inflicted. By its very nature, spread betting is risky business because it is quite niche orientated, but adopting some sensible spread betting risk management can significantly help avoid any disasters.

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6. Spread Betting Features

Spread betting allows for a very fluid way in which to gamble on live events, giving opportunities to close the bet early, or even completely change the make up of the bet whilst the event is still active. It also allows for a longer-term viewpoint to be adopted, possibly over a complete tournament, or race meeting, rather than specifics. Conversely, it permits drilling down into single events and betting on individual performances.

6.1 Spread

The spread, also referred to as the line, is basically used to even the odds between two unevenly matched teams or individuals. Bookmakers set a spread with the intention of bringing an equal amount of betting action for both sides of the spread. In essence, it is what a betting company predicts will occur in a specific market for different events and for that they produce a price for buying or selling, leaving the punter to decide which is right.

6.2 Bet Size


When betting on the spread, one thing that is a must is the account holder has to have sufficient funds to cover any losses incurred. As a consequence, bet sizes have to match the money risked with potential loss, so the worst case scenario always has to be considered.

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6.3 Bet Duration

All spread bets are required legally to have an expiry date of sorts, when the profit or loss will be realised, because anything else would not actually be regarded as a bet. Nevertheless, any spread betting duration can run for as long as the bettor wishes, even with a settling date long into the future.

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7. Spread Betting Example

Although it may seem complicated, spread betting is actually quite straightforward. A player either buys or sells – as simple as that. A good spread betting example might be in football, and the spread could be for the total number of goals in a game.

If it is set at 3.9-4.1 it basically is saying that the betting company believe that a fair average would be a total of four goals in the match. Therefore, the bet is either to buy, if believing there will be more than four goals, but sell if thinking there will be less.

In this case were a bet to be placed to buy at $100 and the result ended in a 6-2 scoreline, the bettor would pocket $400, as there were four more goals than the spread predicted. The reverse of that however would be if the game ended goalless, it would have cost the punter $400, as there were four less goals than predicted. That is not a particularly complex spread bet in football, but it covers the basics.

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8. What is Spread Betting and How Does it Work - FAQ

8.1 ⚽ What can I spread bet on?

There are so many opportunities to spread bet, with most sports covered, together with politics and financial markets, among others. These can be daily funded bets, weekly, monthly, or even quarterly bets.

8.2 ⚽ Is spread betting the same as day trading?

Although there are obvious similarities, spread betting and day trading are NOT the same, as there are no commissions involved.

8.3 ⚽ What are the advantages of Spread Betting?

Greater flexibility is one of the chief advantages of spread betting and with the possibility of using acquired knowledge to be even more accurate with selections, it should encourage inexperienced gamblers to quickly resolve what is spread betting and how does it work?

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