Financial spread bet is a way to trade on the financial instruments found on the many stock exchanges throughout the world. It is unlike trading because trading involves the purchase of financial instruments.
Financial spread bet is making a wager on which way the financial instrument will move. For example, if the current market price of a share is $7.21 a spread bettor may believe the market price will increase. Therefore, a trader will look at the spreads offered by financial spread betting firms to place a buy bet. The spread may be 721-723 so the financial spread bet would be a buy bet on 723. The bet would result in a profit only if the market price rose above 723.
A financial spread bet can also be a sell bet and would be applied when a trader anticipates the market price to decline. Taking the same spread above, a trader would place a sell bet on 721. In order to win on this financial spread bet the current market price would need to go below 721.
A financial spread bet will also require a wager which can be determined by the trader. The wager is multiplied by the total price movement to calculate the profit or loss.