How to Spread Trade
Within each market, a buy and a sell price will be quoted for the price of an underlying financial asset: this is known as the spread. If you think the market price will rise, you open your spread position at the buy price and your profits will rise in line with any increase in the price. Similarly, if you expect the market to fall, you open at the sell price and profits will be proportional to any decrease in the price.
Equally, losses will rise if the market moves against your view.
You also decide on the size of your position, although spread trading is a leveraged product, so you can open your trade by depositing just a small percentage of the full value.
Example spread trade on the FTSE 100:
- The FTSE 100 price at Shelbourne Markets is trading at 6448 - 6450. You believe that the FTSE is going to rise and you decide to buy at 6450, with a stake size of €10 per point. The nominal value of your trade is €64,500, but you only need €800 on deposit to open the position.
- The FTSE subsequently moves upwards to trade at 6520-6522. You decide to close your position at a profit, so you sell your same stake at the sell price of 6520. This represents a gain of 70 points, which when multiplied by your stake of €10, nets a tax free profit of €700.
- No commission or fees apply to the trade above, all of the costs are contained within the spread.
- Spread trades like this can be opened on multi-asset classes with Shelbourne markets, including shares, indices, ETFs, commodities, precious metals, bonds and FX.
- For an example of a spread trade on a share, please click here.