The discussion as to the legitimacy of financial spread betting as a way to invest is regularly up for debate. Indeed, it is just a type of internet gambling – isn’t it? To achieve better insight of the argument, it is a good idea to examine the hard truth. Spread betting is a derivatives instrument proffered by online financial broking firms. They offer a platform to anyone who wishes to speculate and in essence place bets on financial market fluctuations. Thus, the trader never really buys the underlying product, and could make capital from falling markets just the same as from rising ones. Spread betting is officially classed as a financial product and is only offered by companies that are governed by the Financial Services Authority. Trading is based on margin, like CFDs trading. In most examples however, spread betting traders are not subject to capital gains tax and often commission is not charged. With a comparatively small sum of funds an investor may begin placing so-called ‘bets’ on a range of markets. These may include shares, indices, commodities and currencies.

Positions opened by a trader are never usually open for more than a day – it is a quick means of trade.Therefore, assuming these straightforward facts, may we assume that spread betting is truly a type of gambling? The answer is “no”. As a fully regulated activity, financial spread betting cannot be categorized as a form of gambling. A spread betting company must adhere to a strict set of rules to be able to offer accounts and a base for trade.Indeed, countless people who partake in other versions of direct trade, like foreign exchange, indulge in financial spread betting as an additional way to make profit. But is it a recommended means of investment?

Recently, high-risk speculation on the foreign exchange market has been put in the firing line by lots of authorities and financial analysts who argue that it can lead to severe economic financial fallout. Some have even blamed derivatives trading as one of the root causes of the heavy recession of 2009. Because speculative investors can make money out of a falling market, critics have reasoned that risk-taking can become aggressive and uncontrolled – thus bringing the problems of currencies such as the euro in recent times.Anyone who does choose to partake in financial spread betting must make themselves aware of the serious amount of risk that is involved. Foreign exchange markets may change suddenly and unpredictably, meaning a bet that might have seemed winning just now could suddenly switch the other way, resulting in heavy loss for the trader.