How to make money from spread betting

The perils of spreadbetting and CFD trading

Spread betting and CFD trading is becoming ever more popular as confidence returns to the markets. This has resulted in many people seeking out ways to make money from spread betting.

Firstly, apologies. The title of 'How to make money from spread betting' is extremely and deliberately misleading. The purpose is to try to tempt those who think that they can make money from spread betting into reading the article. Hopefully I haven't scared you off just yet!

I have written previously about 'My CFD experiment failure'. This is when at University I thought that I would give CFD (contract for difference) trading a go. This is extremely similar to spread betting. The essential idea is that you place a 'bet' on which way a stock price will turn or a particular index/currency/price will move. In spread betting you agree to pay a certain amount to the 'house'/broker if your bet goes against you. This can mean that if things go drastically wrong then you can find yourself owing a lot more money to the broker than you originally intended. On the flipside of the potential losses is that CFD trading and spread betting has the potential to generate a lot of money if the market goes your way.

Making money from spread betting

So the answer to the question 'How to make money from spread betting' is a simple one. You can't. You will not make money from spread betting in the long run. You will lose money. I repeat. You will lose money.

Several of you are probably thinking "I've tried spread betting or Forex trading and I've made money so Mr.Moneybanks is just wrong". To those people I argue that you have just gotten lucky in the past. If you carry on spread betting or CFD trading then you will lose money in the long run.

You cannot predict the market

Why is it that you believe that you have a divine insight into the way that a particular price will move in the future whilst you are sat at home on a simple laptop staring at a chart. You are betting against some big players: hedge funds, PE firms, and investment banks and yet you believe that you are right and that they are all wrong.

What's worse is that you are paying to have the contract open. You pay for every hour that you are betting until the contract is closed and you have either won the bet or lost. In addition, you will pay fees in order to make the bet in the first place. Finally, and I am repeating myself, you still believe that you are correct in predicting the future of an index movement. If you have that level of insight then play the lottery and guess the numbers correctly. It'll be a hell of a lot cheaper to make a lottery prediction then to bet on the movement of a price.

Spreadbetting is all about supply and demand

Price is determined by market demand and supply. You do not have insight into all the demand and supply in the market. Professional traders may have more of an understanding if they are working for a big institutional investor at they will be using Bloomberg terminals and other newsfeeds sucking up news all day on the prices that they are following, along with sophisticated data analysis tools. You, on the other hand, are at home and have BBC news or CNN at your disposal and yet you have the arrogance to assume that you have more knowledge. Reality check: you don't.

Now you may think that I'm coming on a little strong or being a little bit harsh and for that I apologise. It is this strong because I've lost count of the number of times that I've heard and read about people wasting their money on spread betting and CFD trading. Don't do it. Just don't! Spend your money in any other way - enjoy a mini break, invest it into a bond or an index fund (over the long run) but do not gamble away your savings! You will lose money. to make money from spread betting? You don't. So stop trying!

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1 comment

theFIREstarter said...


I was a little unnerved when I read the title but glad to hear some good advice contained in the article.

Hopefully people googling spread betting will get the dose of reality they need and stop wasting their cash.