Spread betting is a fairly recent development in the gambling world and was introduced to the general public in the mid 1980's by a firm called City Index. Since then spread betting has gone from strength to strength, and many professional gamblers claim that it has been responsible for revolutionising their betting activities.

The concept behind spread betting is quite simple. Instead of simply placing a bet which wins if you win and loses if you don't, spread betting rewards and punishes according to how right or wrong you are about any given event. For example, traditional bookmakers may be offering odds of 10/11 about a horse called SPEEDY EQUINE winning the 2.30 at Doncaster. Spread firms, on the other hand, may offer a 'spread' that SPEEDY EQUINE will beat his rivals by 5-7 lengths.

If you think SPEEDY EQUINE will beat his nearest rival by just a length or so, you would SELL the spread at (say) £10 per point. If the horse does indeed win by a length you will win £40. This figure is calculated by taking the lower figure of the spread (5) and deducting the actual winning distance (1). Thus 4 times your £10 point will return you £40.

On the other hand, SPEEDY EQUINE may trot home and win by 10 lengths. If this is the case then you will have lost £50 (5 - 10 = -5). Of course if you had BOUGHT the spread (expecting a victory of over 7 lengths) you will have profited by £30. This is calculated by taking the higher figure of the spread (7) and deducting it from the actual winning distance (10). Thus 3 times your £10 point will return you £30.

This may all sound rather complex, and to be quite honest it is confusing until you have wrestled with the theory for a while. But after a little study, the sheer simplicity of the concept will hit you like a slap in the face. To aid you in reaching this state of knowledge, most spread betting firms are happy to send a free information pack to anyone who requests one (details in the Appendix at the end of this lesson).

What is immediately obvious is that spread betting is without doubt the most volatile form of betting available in the UK today. Get it right and you could win many times your stake - usually much more than you would win on a traditional win/lose bet. But get it wrong and you could flush everything down the pan in one fell swoop.

With spread betting you can bet on almost every popular sport available. You can also bet on the movements of financial markets all over the world. This facility attracts a massive number of punters, and there are literally hundreds of stories of people who have both won and lost fortunes in very short spaces of time.

For example, in 1986 one City Index spread bettor specialising on financial indices made a profit of £1,000,000 in a week. But unless you think this is just too easy, take heed: the very same bettor lost it all in the following three weeks!

Another City Index client bet £120,000 plus tax on Boris Becker to win the 1987 Wimbledon tournament at the equivalent odds of 5/6. Becker lost and the client is recorded as having said, "Oh well... you win some, you lose some..."

So big winnings are possible in spread betting, but so are big losses. How can a potential spread bettor try to limit his losses and still stand a chance of pocketing some profit? The answer according to some spread afficionados is the 'stop loss' technique....