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How to calculate a spread betting?

How to calculate a spread betting?

Postby colvyr » Wed Jul 25, 2012 7:21 pm

Basically I started to trade a spread betting stocks. I do understand how prices are generated; what's the spread and what is the margin required to buy/sell shares. But I don't actually understand how the actual brokers "spread fee" calculated. Say EUR/USD buy 1.23153 sell 1.23168 and the brokers spread is 2. So it is 2 pipes down. But how shall I calculate these 2 pipes down? 2 pipes down of what of the price I purchased or sold the shares? Or in addition I pay some extra money? I am totally confused despite doing great with my demo account.
colvyr
 
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How to calculate a spread betting?

Postby wyatt54 » Wed Jul 25, 2012 7:31 pm

Spread betting is betting so much a point. You have to know what a point is in any particular instrument. Take shares; the spread is based around the bid/offer price in the market (a bit wider). So 220p-221p might be 219/222. If you bet £1 a point the point is based on 1p movement. If you bet £1 a point you start off by losing £3. £1 a point is like buying 100 shares. So your bet has an exposure of 100 x 222p=£222. If the margin is 10% then it will be £22
Always look at your exposure. For example £1 a point on a 10p share is £10 whereas £1 a point on a 1200p share is £1200.
Let's say your risk is 50% then example 1. is possible £5 loss whereas example 2. it is £600 (yet both are £1 a point)
Don't mess about withdemos. you are wasting your time. Do it with real money, you will learn quicker! Start VERY small!
wyatt54
 
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Joined: Mon Jun 25, 2012 10:54 am


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