What is a Spread Bet?
Spread betting is a new kind of betting which involves users to guess the future price change of a currency pair. Bets are usually made per pip or per move. A sum is placed, and then the bettor has to wait for the changes.
Irish and British residents find spread betting a really attractive way of making profits online. The reason for this is that in Ireland and the UK spread-betting is tax-free. Keep in mind that the laws can change, and their influence might depend on your status.
Example of How Spread Betting Works
For better understanding, we shall provide a simple example. Let us imagine that there is a person named James. James thinks that the EUR/USD pair’s exchange rate is going to rise in value. He decides to place a BUY bet of $1 per pip. Do not forget that one pip equals 0.0001.
The cost of the trade differs according to the currency pair traded. This should also be kept in mind. In spread betting, users also pay the trade price. It is calculated by the bet size that is multiplied by the spread of the pair.
James has placed a bet of $1 per pip, and the spread of the EUR/USD pair is 1.8. This means that the sum charged from James will be $1.80. If the bet on a platform moves in James’s favor for 10 points, his profits will be calculated this way: $1 x 10 = $10. If it works on the contrary and the bet moves against James for 10 points, he will lose $10.
How about you try making a bet now? It’s all that simple!