In financial markets traders can speculate on the future directions of market prices of different assets, such as stocks, commodities and currencies. This activity is called spread betting and it gives investors another room to gain profit according to the price movements, whether it is rising or falling. But is there really a future on predicting future market movements?
Long Way to Go
Financial instruments have both its buy price and sell price. From these two prices, the spread is determined out of their difference. Out of this spread, traders came out of a derivative products called spread betting where they can make a bet on the price movement of a security.
Simply, traders make an educated guess on the future movement of asset prices whether it will go up or down. If a trader go long, a profit will be realized should an increase in price occur but if he go short, he will earned money if the price fall down. A loss will be incurred if the speculation does not match the future price.
At first glance, spread betting looks so easy as you would just predict prices will rise or fall but despite the so called simplicity, many traders, in fact more than 80% of them, lost money on products offered by the industry.
Predicting the future is difficult and a daunting task, even for professionals, as it requires thorough research and one should stay updated of the recent events in the global economy to outperform the market. Thus, losing money in spread betting more than your stake could put you in larger debts if the market moves against you.
The future is hard to predict and for spread better, it is always a long way to go.