How Spread Betting Companies Make Money

Spread Betting companies offer a service to bet on financial spreads - and although they do not charge a commission fee like more traditional trading, they do make money on each transaction. 

How do they take their fee, so-to-speak, if they are not charging a fixed commission? They make it on the spread - the difference between the buy and sell price. For instance, if Vodafone is trading with a buy (bid) price of 186.50p and a sell (ask) price of 186.60, a spread betting company might offer it at 186.45 / 186.65 instead. You should note, that the price is wider than the actual spread of the financial instrument - so the price will have to move further before you are in profit.

Because Spread Betting companies make money from you trading, they will generally encourage you to trade a lot - however, this is where many individual traders come unstuck - by [over-trading]. You will notice on the vast majority of the spread betting platforms, the buy and sell buttons are large and colourful - and the buying or selling process is very easy. Remember, they want you to trade.