Spread Betting Strategies

We cover the best spread betting strategies from top to bottom…

Updated: May 27, 2024
Matt Crabtree

Written By

Matt Crabtree

|
Mark Tovey

Edited By

Mark Tovey

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Spread betting in the financial markets, including the forex and stock exchanges, is a popular short-term investment strategy. I'm going to teach you five of the finest spread betting techniques, along with some additional helpful hints, features, advantages, and downsides of spread betting.

ProviderScoreDetails
1. Pepperstone*★★★★★Learn more
2. IG**★★★★★Learn more
3. Capital.com★★★★★Learn more

*Pepperstone Disclaimer: Between 74-89 % of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

**IG Disclaimer: Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Top Spread Betting Strategies — Compared at a Glance…

Spread betting involves a variety of tactics, making it crucial to develop a strategy that not only suits your comfort with risk but also offers a real competitive edge. Remember, the stakes are high due to the leveraged nature of trading.

Before diving into trading, it's essential to plan your approach thoroughly. This means assessing your risk tolerance, crafting a specific spread betting strategy, and setting clear targets.

First, select the market you wish to enter. You might consider the foreign exchange market, stock indices like the FTSE 100, or even the volatile cryptocurrency market.

Risk management is key in spread betting, as losses can mount quickly and unexpectedly. Implementing stop-loss orders is a fundamental practice. These orders close your trade at a specified price if the market falls below it, helping to cap your losses. Without such measures, you risk losing your entire investment or even owing money.

Next, choose a reliable spread bet broker to work with.

But what are the top strategies for spread betting? This guide explores the best spread betting strategies, providing insights that every beginner should know before transferring investment funds from their online bank account.

Spread Betting Methods

Every trader has their own set of priorities that usually guide their choice of trading technique. While there is no universally superior method, understanding the various strategies and the risks they entail is fundamental.

Here, I discuss five distinct spread betting techniques, each employing leverage to magnify potential returns by predicting minor market movements. Remember, no single strategy guarantees success, and the choice largely depends on the trader's individual objectives and risk tolerance.

1. Trend Market Top Spread Betting Strategy

Trend market spread betting involves placing bets on the market direction by analysing price patterns and trends. In a trending market, an upward trend is characterised by higher highs and higher lows, while a downward trend shows lower highs and lower lows.

Traders can use these trends to make informed predictions about potential market reactions. A common strategy is to enter a long position at a trend's low point or when forming a higher low, indicating a potential upward move. The strategy hinges on identifying and following the trend until signs show it may be reversing.

Unlike investing in mutual funds, which often involves a longer-term approach, trend market spread betting allows investors to capitalise on quick market upswings. Traders frequently utilise technical indicators to ascertain the beginnings and ends of trends, making it a viable strategy regardless of overall economic conditions, whether in bearish or bullish markets.

2. Reversal Strong Spread Betting Strategy 

Reversal spread betting focuses on identifying and acting on sudden directional changes in the market. This strategy involves placing bets that the market will move in the opposite direction after a significant rise or fall once it reaches a critical price point.

Both bullish and bearish reversals are possible. For instance, after a significant upward trend, a trader might predict a downward reversal. Similarly, a market that has declined substantially may be poised for an upward reversal. However, within these major movements, temporary price fluctuations—retracements—often occur. These are sometimes mistaken for permanent changes but are merely short-lived shifts within a larger trend.

To effectively identify reversals, traders often rely on key candlestick patterns, which help visualise price movements over specific periods. These patterns can indicate potential market turns. Additionally, employing fundamental and technical analysis techniques, such as monitoring trading volume at critical levels, can help in recognising these pivotal changes.

Reversal spread betting is considered riskier than some other strategies because it requires predicting a change in market momentum. For example, if signs suggest the market has peaked, initiating a short position could capitalise on the entire downward movement, potentially increasing profits. However, mis-timing the entry can lead to greater losses, highlighting the strategy's high-risk nature.

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Spread Betting Strategies 1

Image source: Wikipedia

3. Breakout Top Spread Betting Strategy 

The breakout strategy ranks third on my list of the top spread betting strategies. This approach involves placing bets on market breakouts, particularly when markets are range-bound. The upper and lower bounds of this range, known as the “support” and “resistance” levels, are pivotal. A breakout trade becomes attractive after the market touches these levels and begins to move beyond them.

Traders aim to capitalise on these price movements by entering at critical range levels as early as possible. Volume indicators are often used to predict a breakout by showing an increase in trading activity around these critical price levels. By monitoring these indicators, you can avoid premature trades and wait for a confirmed breakout.

For those employing breakout trading strategies, staggered entry positions can also be useful. Instead of buying at the current market price, you might set limit orders around the crucial price point, whether at the range's top or bottom. This method allows you to initiate trades as the asset hits a specified price, spreading your entries across a broader price range to minimise the risk associated with wrong timing. However, choosing the right entry point remains challenging and may expose your trade to early stop-loss activation or force you to exit your position prematurely.

4. Consolidation Best Spread Betting Strategy

Stop-loss orders allow you to limit your losses.

The fourth best spread betting strategy focuses on market consolidation. This strategy involves trading on the price movement between two predefined points—a high and a low—within the same asset.

Traders using this approach look for price “bounces” between support and resistance levels and bet on the direction of these movements. In a consolidating market, there is often a predictable oscillation between these levels.

For example, if an asset's price is at the lower level of consolidation and has consistently reacted positively from this support, it might be an ideal point to initiate a long spread betting position. As the price moves towards the upper resistance level, known as the “bounce”, traders can capitalise on these small, frequent fluctuations.

Because these price movements are relatively minor, leverage is typically used to maximise potential gains without requiring significant capital outlay. This technique, known as “scalping”, takes advantage of these slight changes within the range.

Indicators can be crucial in deciding when to exit a trade, such as when the price reaches the high or low of the range. Furthermore, if the established range is breached, it can act as a clear point for setting a stop-loss, helping to manage risks more effectively.

5. Event-Based Popular Spread Betting Strategy  

Event-based spread betting focuses on the impact of significant news events on market prices. This strategy is particularly popular among traders who respond quickly to breaking news and economic data that can influence market movements, making it a common approach in international markets.

Traders using this method capitalise on the swift dissemination of information and its potential impact. For example, if negative news about a publicly traded company emerges, its stock price might decrease. Conversely, positive news, like an innovative breakthrough by a company, can lead to a price increase.

The challenge with this strategy lies in timing the market correctly. Traders must decide quickly when to enter and exit trades based on how they anticipate the market will react to the news. While this can lead to significant gains, it also carries a high risk, especially without the support of technical analysis to signal when the news-driven market movement might end.

6. Moneyline Sports Betting Strategy  

Sports-based spread betting strategies vary widely among bettors, ranging from novices to experienced gamblers. These strategies are designed to improve your chances of winning sports bets.

A popular approach is the moneyline bet, which involves selecting a team to win outright without a point spread. For example, in a football match with Manchester United (-250) versus Chelsea (+210), Manchester United is the favourite (indicated by a minus sign), and Chelsea is the underdog (indicated by a plus sign). The odds suggest that Manchester United has a higher ranking or better recent performance record than Chelsea.

The moneyline is straightforward, making it an excellent starting point for new bettors. It allows you to bet on the favourite, and if your chosen team wins, you win the bet. Although professional gamblers might avoid moneyline bets due to their simplicity and perceived lower value, they shouldn't be overlooked by others.

7. Points-Spread-Analysis-Based Spread Betting Strategy

In sports spread betting, one popular method is betting on point spreads, which requires deeper analysis than simple moneyline bets. Here’s how it works using a football match for context:

Imagine a match where Manchester United is playing against Manchester City, with a point spread listed as Manchester City -1.5. This means Manchester City is favoured to win by more than 1.5 goals.

If Manchester City wins the match by 2 goals or more, they cover the spread. For example, if the final score is Manchester City 3, Manchester United 1, then Manchester City covers the spread.

However, if Manchester City wins 2-1, they do not cover the spread since the winning margin is only 1 goal. If you bet on Manchester United +1.5, you would win your bet in this case because Manchester United lost by fewer than 1.5 goals.

This approach requires you to predict not just who will win, but by how much, adding a layer of strategy to your betting decisions.

What is “Spread Betting”?

Spread betting allows you to speculate on price movements without owning the underlying asset. Traders use technical analysis to decide when to enter or exit a trade, predicting how prices will change over time.

In spread betting, you wager a certain amount for each point the price moves in a direction you've predicted. If you use leverage, these price changes are magnified, increasing both potential profits and losses. Due to this, spread betting often occurs over short periods to manage the amplified market fluctuations.

A significant risk with spread betting is that most retail investor accounts lose money. This trading type is highly volatile, and it's vital to secure gains or cut losses quickly to avoid the rapid price changes that can drastically impact profitability.

Different strategies may suit different investors. The right approach depends on your personal goals and risk tolerance.

Spread betting carries a high risk of sudden financial loss due to its leveraged nature. Ensure you understand the risks before you start trading.

Setting Up The Entries and Exits

While the odds are generally against you, spread betting can be profitable if you structure deals to minimise losses and maximise gains. For instance, consider Ben, a fictional trader with an 80% success rate, winning four out of every five bets.

Another fictional trader, Paul, has a 40% success rate. At first glance, Ben seems more successful. However, the financial outcome of each bet can change this perception.

Imagine Ben gains £5 for each win but loses £25 for each loss. Despite his high success rate, his net loss is £1 because the loss on his one unsuccessful bet wipes out the gains from his successful bets:

Loss of £1 = (0.8 x £5.00 – 0.2 x £25.00)

Now consider Paul, who only wins 40% of the time but sets up his bets differently. He wins £25 for each successful bet but only loses £5 for each failure. His net profit is £7, showing that despite a lower win rate, he ends up financially ahead because of better risk management:

Net profit of £7 = (0.4 x £25 – 0.6 x £5)

Top 3 Spread Betting Platforms

You can see a full write up of our six favourite spread-betting platforms here. But we’ve also compiled a quick rundown of the top three contenders below:

1. Pepperstone Spread Bet Platform

Pepperstone is a leading online platform designed for experienced traders in forex, contracts for differences (CFDs), and spread betting. It caters particularly well to those who are adept at strategising and navigating trading interfaces. Offering access to major trading platforms such as cTrader, MetaTrader 4 (MT4), and MetaTrader 5 (MT5), Pepperstone allows both individual and corporate clients to engage in trading activities.

Users can employ indicators and customisable charts on these platforms to trade a variety of instruments including currencies, stocks, and commodities. The costs associated with spread betting at Pepperstone vary according to the type of account held. Similar to Capital.com, their entry-level account offers 0% commission on spread betting, integrating all costs into the spread.

Most markets on Pepperstone provide commission-free trading for raw account types, although some charges may apply, starting from over £2. Accounts can be funded through various means such as PayPal, credit cards, and bank transfers.

Pepperstone is also known for its educational resources and market analysis, which can significantly enhance a trader’s ability to make informed decisions. Moreover, it offers 24-hour trading during the US earnings season and boasts strong liquidity, ensuring fast execution without requotes.

However, it’s crucial to acknowledge the risks involved. Spread bets and CFDs are complex instruments and carry a high risk of losing money rapidly due to leverage—75.2% of retail investor accounts lose money when trading with Pepperstone. Traders should understand how these instruments work and assess if they can afford the associated high risks.

Pepperstone has been recognised as a top provider in the industry, winning awards for its platforms and market presence. Traders looking for a robust trading platform with comprehensive support and advanced tools will find Pepperstone to be a suitable choice.

Pepperstone logo

Between 74-89 % of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

2. IG Spread Bet Platform 

As geopolitical alliances shift, with China and Russia uniting against Western interests, now may be an opportune time to explore investments in emerging markets.

Emerging markets, including resource-rich countries like South Africa and Brazil, offer diverse financial opportunities. IG, a key player in this sector, provides access to a broad range of financial instruments such as equities, bonds, trending index funds, currency pairs, and contracts for differences—all from a single platform.

Investors can engage in spread betting on IG, which grants access to approximately 20,000 markets, covering a vast array of commodities, currencies, equities, and indices. This platform supports betting in both upward and downward directions for each market position.

Leverage is a critical feature in amplifying the outcomes of bets, with UK individual investors limited to a maximum leverage of 1:30 on any local trading platform. IG further simplifies the trading experience with its no-install, browser-based interface, which is compatible with both Android and iOS mobile devices.

To get started, an initial deposit of £250 can be made via card or bank transfer.

IG is acclaimed for its ease of use and extensive market access, boasting over 17,000 markets for trading and investing. With tools designed for both seasoned traders and newcomers, IG provides robust support, including 24-hour customer service, interactive educational resources, and expert market analysis, ensuring that traders are well-equipped to make informed decisions.

However, potential investors should be aware of the risks involved. Spread bets and CFDs are complex instruments that come with a high risk of losing money rapidly due to leverage, with 71% of retail investor accounts losing money. It’s essential for traders to understand these products and consider whether they can afford to take on such high risks. IG offers both demo and live accounts, enabling traders to familiarise themselves with the platform before committing funds.

IG logo

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 71% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

3. Capital.com Forex Spread Bet Platform

Capital.com provides an expansive trading platform that allows you to bet on a wide array of assets across multiple markets. Notably, it offers the advantage of stamp-duty-free capital gains on stock trading, which can be a significant benefit.

The platform grants access to over 2,000 stock markets worldwide, extending far beyond the London Stock Exchange to include markets in Canada, Europe, the US, and Australia. This global access is particularly valuable for forex spread betting, with a diverse range of major, minor, and exotic currency pairs available.

Capital.com is also a compelling option for commodity spread betting, encompassing all major commodities such as oil, gas, and gold. The platform operates commission-free, charging only the spread on trades, making it financially appealing for frequent traders.

One of the standout features of Capital.com is the ability to set up spread betting in every market, enabling traders to capitalize on both rising and falling market conditions. Like CFDs, spread betting here allows you to leverage transactions, which can significantly increase both profits and risks. For instance, leverage on major forex pairs is limited to 1:30 in the UK, with lower leverage available on some instruments.

Despite the potential benefits, it’s important to remember that spread bets and CFDs are complex instruments that come with a high risk of losing money rapidly due to leverage. A substantial 70.04% of retail investor accounts lose money when trading spread bets and CFDs with this provider. Traders should fully understand how these instruments work and consider whether they can afford the high risk of significant losses.

Capital.com distinguishes itself with an intuitive platform, transparent pricing, and integration with third-party software like TradingView and MT4. The platform also offers comprehensive educational resources to help enhance your trading knowledge, supported by a free demo account for practice without financial risk.

For those ready to start trading, Capital.com facilitates rapid account setup and funding, with robust customer support available to assist at every step.

Best Spread Betting Strategies: Summary

Spread betting offers the potential for substantial rewards but also carries a significant risk of loss, as even minor fluctuations in the underlying asset can lead to large gains or losses. This form of trading is not suitable for beginners. It demands a deep understanding of the markets, skill in choosing assets, and precise timing.

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