Spread betting is similar to futures trading. It is regulated by the Securities and Futures Authority (SFA). The SFA is the British equivalent of the American CFTC (Commodity Futures Trading Commission) and SEC (Securities and Exchange Commission) rolled into one.
Spread betting is not one market. It is a style of trading that applies to many markets. Spread bettors can use trend following to trade shares, metals, oil, currencies, etc.
Questions? Email.
Why Spread Betting Is Compatible with Trend Following
Spread betting’s structural characteristics make it well-suited to systematic trend following for UK-based traders. The primary advantage is the tax treatment: in the United Kingdom, spread betting profits are treated as gambling winnings rather than capital gains, meaning they are not subject to capital gains tax for most retail participants. This tax efficiency is particularly significant for trend following approaches, which generate their returns through a combination of frequent small losses and infrequent large gains. Under a capital gains tax regime, each losing trade produces a tax loss and each winning trade produces a taxable gain. Under spread betting’s gambling exemption, the net result is simply profits or losses without the administrative burden of trade-by-trade tax tracking.
The instrument mechanics are similar enough to futures that the same systematic rules apply. A spread betting position on crude oil opens and closes based on the underlying crude oil price. The same breakout entry rule that fires on a crude oil futures price breakout fires on the equivalent spread betting price. The same trailing stop that defines the exit in the futures position defines the exit in the spread betting position. The position sizing calculation based on contract size and stop distance works identically. The only differences are the instrument’s regulatory wrapper and the tax treatment of the resulting profits.
The market breadth is also similar. Spread betting providers offer positions on UK and global equity indices, individual shares, currencies, commodities, interest rates, and sector ETFs. This breadth is necessary for trend following’s diversification requirements: the approach captures returns from wherever large sustained trends develop, which requires access to multiple uncorrelated markets simultaneously. A spread betting account that includes crude oil, gold, FTSE 100, EUR/GBP, and US 10-year treasuries provides meaningful diversification across the asset classes and geographies that trend following’s return profile requires.
The leverage available through spread betting is also consistent with futures-style capital efficiency. Rather than committing the full notional value of a position, the trader posts margin against the position’s potential adverse movement. This allows the volatility-normalized position sizing that systematic trend following uses to be implemented with a fraction of the capital that direct ownership of the equivalent exposure would require, enabling diversification across many markets simultaneously.
UK-based traders who want to apply the systematic trend following approaches documented on TurtleTrader, including the breakout entry, trailing stop exit, and volatility-adjusted position sizing that the Turtle system uses, can implement these rules through spread betting accounts with the same mechanical discipline that futures traders apply in Chicago or London’s futures exchanges.
Frequently Asked Questions
What is the difference between spread betting and futures trading for trend following purposes?
The primary differences are regulatory wrapper and tax treatment rather than trading mechanics. Spread betting positions track the same underlying prices as futures contracts and can be traded with the same entry and exit rules. In the UK, spread betting profits are treated as gambling winnings and are not subject to capital gains tax for most retail participants, which is a significant advantage compared to futures trading where each profitable trade generates a taxable capital gain.
Can all the same systematic trend following rules apply to spread betting?
Yes. The breakout entry rules, trailing stop exits, and volatility-normalized position sizing that systematic trend following uses apply identically to spread betting positions. The position is sized based on the spread bet’s point value and the distance to the stop loss, which is the same calculation as futures position sizing. The entry fires when the underlying price reaches the defined breakout level. The exit fires when the price reverses to the defined trailing stop level. The mechanics are the same.
What markets can trend followers access through spread betting?
UK and global equity indices, individual shares, foreign exchange pairs, commodities including metals, energy, and agricultural products, interest rate instruments, and sector ETFs. This breadth covers the major asset classes and geographic regions that diversified systematic trend following requires. A spread betting account with positions across these markets provides the genuine diversification across uncorrelated instruments that the trend following return profile depends on.
Trend Following Systems
Want to learn more and start trading trend following systems? Start here.
