Picking the right provider is vital for spread betters

WITH volatility sitting comfortably at just below the 30 level on the Vix &ndash; a far cry from the high eighties reached post-Lehman &ndash; and the FTSE 100 range bound since early May, spread betters can no longer rely on massive swings in shares prices for their profits. This means it is increasingly important to try to maximise trading efficiency, eking out as much profit per point as possible for each and every trade, which makes narrow spreads desirable.<br /><br />The larger the spread, the more the price needs to move in your favour for you to turn a profit, which means that the narrower the spread the better. It is for this very reason that spread betters need to be extremely aware of what spreads providers are offering &ndash; they can differ by much more than you might initially think.<br /><br />Even for the popular FTSE 100 index daily contract, the narrowest is one point &ndash; at GFT and Capital Spreads &ndash; while a number of providers such as IG Index and WorldSpreads offer two point spreads. Spreadex offers a wider spread of three, but this is offset by greater leverage on offer to clients.<br /><br />For the FTSE 100 future contract, WorldSpreads offers just one point spreads on its rolling future contract whereas GFT and CMC Markets offer three point spreads.<br /><br />The Wall Street daily contract is popular among evening spread betters and most providers will offer a spread of four points while the US market is open. Some, such as Spreadex and IG Index will offer six, although IG&rsquo;s spread on its Wall Street daily future is just four.<br /><br />But while narrow spreads are clearly highly desirable for spread betters at the moment and a means of comparing spread betting providers, there is more to trading.<br /><br />Omer Bhatti, head sales trader at WorldSpreads, says that spreads are a good starting point for a decision between providers, but they are not the be all and end all of reasons to decide.<br /><br />&ldquo;You need to consider the service you get, both in terms of customer service from the dealing desk as well as how the providers treat customers with stop losses,&rdquo; he says.<br /><br />You might also get access to a better platform and better technology, which you pay for through wider spreads. <br /><br />How client orders are treated can vary from provider to provider and it is worth finding out whose approach is most appropriate for you before you sign up with any particular company. But Bhatti says that it is possible to pose hypothetical examples to dealers who can elaborate what would happen in certain circumstances if you quiz them enough.<br /><br />When choosing your spread betting provider, it is important to pick carefully and considering what is most important to you. Narrow spreads should certainly be a key factor, but so should customer service and risk management tools on offer.