Bet Per

Trading Basics

Bet Per

The ‘Bet-per’ quantity is the minimum movement you can bet on within a market.

This tends to differ between different markets. Typically, the ‘Bet-per’ for the GBP-USD exchange rate is 0.0001, whereas the ‘Bet-per’ for the UK 100 is 1.

Bet per point refers to the practice of spread betting, in which you make a bet whether a financial instrument will rise or fall in value by buying or selling for a certain stake per point.

Spread betting can be performed across all financial markets, including the stock, bond, currency and commodity markets.

Example of a Bet Per Point Trade

Let’s say S&P 500 is currently trading at 2811-2812.

The first price is the sell price, or the price at which you’re able to sell the index, and the second price is the buy price, or the price at which you’re able to buy the index.

The difference between these two prices is called the spread, which in this case represents the transaction cost to make the bet.
If you think that the US stock market won’t perform well, you could sell the S&P 500 (which consists of a basket of 500 stocks) at 2811, and bet $10 per each point.

If the S&P 500 falls to 2789-2790, your total profit would be calculated based on the difference between your selling and buying price, which in our case equals to 21 points (2811-2790).

You would have made $210 on that trade.

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Spread Betting on Stocks and Currencies

In the example above we showed how a spread bet would look like on a stock index.

However, you can make similar bets on other financial markets as well, such as the stock or Forex market.

In this case, the terminology changes a bit but the overall concept remains absolutely the same.

While stock indices move in points, stocks and currencies move in ticks and pips. A tick is the smallest increment that a stock can change in price (usually $0.01 or $0.05), and a pip represents the fourth decimal place of an exchange rate.

Currency pairs that include the Japanese yen have their pips located on the second decimal place.

If the EUR/USD pair currently trades at 1.1650-1.1654, you could bet that the pair will rise by placing a BUY bet at 1.1654.

If the exchange rate rises to 1.1680-1.1684, and you bet $5 per pip, you could sell the pair at 1.1680 and make a profit of 26 pips, or $130.

Similarly, if you place a BUY bet and the pair falls to 1.1630-1.1633, you would have a losing bet with a total loss of 24 pips, or $120.

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Other Trading Basics

Carry Trade

A forex trading strategy of borrowing funds in a low-interest rate currency and buying assets in higher yielding currency.

For years this was selling Yen to buy Dollars.

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Abnormal Market Conditions

A term used by brokers to describe a rapidly moving or thinly traded market.

Depending on the terms and conditions, this allows brokers to examine and possibly change trades placed during these conditions.

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Brexit

The process of the United Kingdom (UK) leaving the European Union (EU) – it is a combination of ‘British’ and ‘exit’.

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