Is Financial Spreadbetting a form of Gambling?

Right from the beginning, trying to predict the way a stock or market will move has been called stock rumours. There should be no doubt for the fact that if you are going to trade the markets, then you have to speculate on the movement of the market. Traditionally you possessed to create all the money required to buy joker gaming or short a stock, for instance if you wanted to buy 200 shares of Barclays Bank at 500p per share you possessed to deposit £1000 in you share account. In some cases your broker could let you trade on perimeter, then you definitely must deposit half the amount (in this case £500) and could buy the spouse on perimeter. However, times have changed and the financial markets have introduced various types of derivatives and instruments that enable visitors to trade without putting down the entire deposit. Spreadbetting is one of such instruments.

The first step to answering the question in the title is to define the word what playing and rumours. Playing is defined in the thesaurus as; to play at any game of chance for cash or other levels; to position or risk money, or anything of value, on the upshot of something involving chance; a venture in a game of chance for levels, esp. for high levels. Rumours on the other hand is characterized by; proposal in business transactions involving considerable risk but offering the chance of large gains, esp. trading in everything, stocks, etc., in the hope of cash in on changes in the market price; a conclusion or opinion reached by such consideration: From the above descriptions you can see that both words have similar meaning. Both involve predicting the result of an event. However, if we shift away from the descriptions in the thesaurus, while playing is synonymous to taking an uneducated guess, rumours is synonymous to taking an educated and calculated guess. While the chances are against a gambler, the odds are in favour of the speculator. According to Dickson R Watts in his book Rumours as a Fine art, “Speculation is a venture more than calculation. Playing is a venture without calculation. Regulations makes this distinction, it sustains rumours and condemns playing.

In his biography, Reminiscences of a Stock Seller, Jesse Livermore, a legendary stock speculator said of his early days as a speculator “Yet, I can see now that my main trouble was my failure to hold the vital difference between stock playing and stock speculation”. Another relevant quote from his book is “Since suckers always lose money when they gamble in stocks : they never really speculate”.

Let’s make contact with the question, Is spreadbetting playing? Our focus is financial spreadbetting. Quotes derive from the actual price in the market, e. r., if I want to buy 100 shares of Vodafone, and the price in the market is 177-177. 8, the quote given by the spreadbet company has to reflect the current price of Vodafone. If the price of Vodafone increases, I make money irrespective of the strategy I used. On the other hand, if the price of Vodafone is catagorized, I lose money irrespective of the strategy that i used. Taking the above into consideration, it is not the strategy of shopping for the shares, but the way I arrived at the decision to buy which make it a gamble or rumours.

First and foremost, you must always trade with a plan. Plan your trade and trade your plan. If you trade without a plan, then that is playing not rumours. For example, I set off in the morning without any idea of selling a share, however during lunch I notice that Sainsbury’s has rose up 5% today. Then i buy 100 shares of Sainsbury planning on that it will still rise further. My action will be classified as a gamble rather than rumours. Such acts if done consistently would lead to loses in the long run.

Also, if i continually violate my methods, for instance buying when the slope of the moving averaging is falling, or if i repeat the same mistakes many times, then i am tending towards playing rather than rumours.

Finally, if it is not used wisely spreadbetting does carry a higher risk than tradition methods and you can loss more than your initial investment, the advanced of risk does not make it a playing tool. It requires a different type of risk and money management compared to traditional ways, it’s suited for different sorts of trading. If you think that because it has bets embedded in it’s name, then don’t speculate on the markets through any means.

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