One of the major uses of spread betting is shorting, where you are doing the opposite of buying a share. You make money if the stock goes down.
I would urge new investors to tread carefully before getting into shorting, but it's something that must be considered because it means you can make money during a period when the market is going down. And while I do urge caution, it is something you should learn about quite quickly.
There are various ways of shorting: CFDs, covered warrants and spread betting. But the easiest method is to spread bet. That would certainly be the method I would use first.
Markets often turn down for quite a while and shorting could be the only way to make money. I tend to only take out short positions in quite large companies. The reason is mainly the spread. The spread firms usually quote much bigger spreads in smaller companies, and for shorting purposes I find the spread is simply too much.
Obviously, the best years to have taken out short positions were in 2000 and 2001 because the market was tumbling and tech shares were being hammered. During those years I held more shorts than longs (buys) because it made sense. I believe at some point in the future I will do the same again.
I usually have at least two short positions open.
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