Financial spread betting is fast becoming a really useful additional tool for financial investors to take advantage of the financial markets.

Spread betting involves taking a position on an individual market instrument and what it will do next. If you think, say a share, is likely to rise then you would buy (go long), if you think it will fall then you would sell (go short). The amount the market moves in your favour determines your profit or less.

The spread betting company will provide you with a spread which is the difference between the buying and selling price, also called the bid and offer prices. So the spread is a range of outcomes and you simply bet on whether the outcome of the event over will be above or below the spread.

There are three main advantages of spread betting.

Leverage. You are not actually buying the physical asset just taking a position on its future price. Therefore, the spread betting provider only asks for a small deposit, around 10%, on every position you take which means you can take the equivalent position you would in the real markets for less money up-front.

Tax-free profits. At the moment, in the UK, you don't have to pay stamp duty or capital gains tax.

Access to markets. Most financial spread betting is done on powerful online dealing platforms that give you 24-hour access to the global markets. You can back a huge range of products such as pork bellies, gold and Apple shares and there's no need to call a broker up to arrange the trade for you.

Sounds too good to be true? A word of warning, profits can be substantial but you can also lose a substantial amount of money too. Another word of warning, trading is addictive and can provide significant emotional highs and lows. You must have a plan for every trade and you must be ruthlessly realistic and know when to get out if it doesn't work in your favour.

A good way to start spread betting on the financial markets is to choose a product such as copper or shares in a certain company and make sure you learn as much as possible about it and chart its progress over a given time period.

This will give you an introductory insight into what kind of events will influence the price of your chosen product over time.

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