Financial Spread Betting

In my last post I spoke about the possibility of opening a second account. This may not be as important to you when you are just starting out and have a low level of capital but do keep it in mind.

There are a couple of reasons why you should consider it if you are to take your trading seriously. The most successful traders out there have a number of accounts.

The first reason for this is the ability to get the best quote. Financial Spread Betting is hard. Anything you can use to your advantage is great, even a half a point on the spread will make a difference.

By having more than one Financial Spread Betting account you will be able to read multiple quotes at the same time (with a little practice!). You will then be able to trade of the better one.

It will take time for you to reach this level but if you can trade this way then you will be ahead of a lot of traders.

The second reason is contingency. These days spread betting trading platforms are a lot more stable. They don’t hang as much and they are very rarely down. The spread betting companies put a lot of time and money into making sure that this doesn’t happen.

But…

What if it does? What if the financial markets are going crazy and you want to trade? When you log on…whoops…you can’t log on.

Do you think you will be able to get through on the phone if this is the case? Not a chance…that is what everyone else will be doing.

A second account should be able to get you through an event like this.

Technorati Tags: Financial Spread Betting, Financial Spread Betting UK, spread betting companies

Today I would like to talk to you about opening a financial spread betting account. This is an activity that you are likely to do on early in you financial spread betting journey.
 
There is some really great news for us here. There has been a massive rise in the number of financial spread betting companies coming into the market over recent years and they are fighting with each other so that YOU select them.
 
You are in the driving seat – You are in control.
 
The great thing about this is the facilities they offer keeps improving, the customer service is getting better, the range of different types of bets keep growing and probably most importantly the cost of trading is coming down.
 
More financial spread betting companies means more choice and sometimes that causes a headache for some people. This blog post doesn’t recommend any account specifically; it acts as a checklist to stop you from feeling so overwhelmed.
 
One thing to remember before we begin is that you can change your mind in the future if you wish…you are not stuck with them forever. You can change to another financial spread betting company so don’t worry too much.
 
After that (very) long introduction shall we begin?
 
Dummy / Practice Accounts…
 
Whenever you read a book or view a website for beginners they tell you to do some paper trading first. Now you can set this up on a spreadsheet and that would be fine.
 
With paper trading you do miss out on the emotions that come with real trading and the potential of losing real money. You should do you best to replicate the conditions that you will be using when trading live to really get the most out of it.
 
This means using a Financial Spread Betting platform and many companies offer a dummy account for you to try. Why not try the account out and practice at the same time?
 
With these practice accounts you can sometimes choose your starting capital. Don’t go crazy… pick the amount that you will be starting with, it will make it more realistic.
 
Customer Service…
 
This is crucial to me. If I have a problem I would like to be resolved as quickly and painlessly as possible. I want a choice of emailing or telephoning the company.
 
But how can you assess the customer service before you open an account?
 
Even though the new account literature is on the internet for all financial spread betting companies these days…why not call them and ask them to post it to you? This is your chance to put them through their paces. If they aren’t good at dealing with potential new customers then how good will they be if you are an existing customer and have an urgent problem?
 
Think about checking out trading forums on the internet. Word of warning here… people like (love?) to moan. I would advise not to read old posts. Instead, start a new topic asking people to recommend a financial spread betting broker, you will be surprised how many will share this with you.
 
Review sites can also be good but watch out here also. Often the person reviewing the site will receive a referral fee if you sign up after clicking on their link. Make sure they have used the service themselves. Why not ask them questions?
 
Best value…
 
Why are you financial spread betting?
 
To make money?
 
Thought so.
 
In that case you want keeps the costs of a trade as low as possible. Now with spread betting you don’t pay commissions, financial spread betting firms make their money through the size of the spread. It is at this point that you may want to think about opening at least 2 different accounts (more on this to follow).
 
Bet Types…
 
In financial spread betting there are many different styles of bets. It is important that you understand each one and I will be doing a post on these shortly.
 
Now you need to ensure that the account offers the style of bet you want. If they don’t then obviously you need to look elsewhere.
 
As I mentioned earlier, the increased number of different financial spread betting companies means that they are offering a greater variety of products these days for you to chose from so I hope that it won’t be a problem for you.
 
Different levels of accounts…
 
You will often find that a financial spread betting firm will offer a range of accounts. Sometimes I get a little confused by which one will be suitable for my needs!
 
The determining factor is usually the level of experience that you have. The golden rule is that if they are offering credit then they are for the more experienced trader.
 
If you in anyway confused about which one to choose then give the company a call and ask them. This is another great way to test their customer service.
 
Minimum capital requirements…
 
These days they are generally quite low. You do have financial spread betting brokers that do have higher minimum thresholds.
 
I remember using a practice account when I first started out, it was ok and decided that I wanted to open my first actual account with them. The problem was they had a high minimum capital requirement to get going so I decided to walk away and go elsewhere.
 
One way of getting around this is putting some money into the account that you don’t want to use for trading. You then need to be thoughtful of the opportunity cost of it just sitting there doing nothing.
 
Minimum bet size…
 
This will be extremely important to those of you who are just starting out. It is important because the size of your bet will determine the amount of money that you are risking.
 
This was definitely one of the most important of all the criteria for me when I started out. I am quite patient and disciplined so I wanted my bets to be small when I started.
 
Again the competition amongst brokers has meant that the minimum bet sizes have fallen. This is great news and I expect (hope) they will continue to fall in the future.
 
Margin requirements…
 
As you should already know, when you are Financial Spread Betting you are dealing with leveraged products. You need to know the margin requirements so you know how much exposure you have and avoid being subject to any margin calls.
 
Additional account functionality…
 
What other functions do you need to trade? Stop losses? Do you want these guaranteed? How much does that cost? Can you set up contingent orders?
 
Write down each function that you want the account to offer and tick each one off as you check out each account.
 
How good is the trading software?
 
Now I understand that you are likely to have your own software for analysis but you will still need to use their software to actually make the trades.
 
It is vital that you can use it and that it is both reliable and quick. The last thing you want is to press the trade button and for it to hang there for ages, worse still…crash.
 
This is hard to check with dummy accounts as they often run off different systems to the live accounts. Again you can ask in forums for other traders’ opinions on financial spread betting firms’ trading platforms.
 
Do they accept trades over the phone?
 
This is something you need to consider as a contingency. What if something prevents you from placing your trade online? Will your broker let you call a trade through and how much does that cost?
 
An extra tip: Always keep the number of you financial spread betting firm in your mobile. You never know when you might need to call them.
 
Extra support…
 
It would be nice if by signing up to an account that you could get access to additional support. See if they have training or seminars that they offer. This isn’t essential and you need to be careful of any sales pitches but would be a nice extra.
 
Account opening incentives…
 
You will find these days that you are bombarded with offers to open an account. Offers can include cashback, tighter spreads for a limited time or even wine and champagne!
 
Now this shouldn’t be a criterion for opening an account for the long term but why not take advantage of that with a second account?
 
Opening a second account…
 
I want to talk more about this but realise that this post has gone on long enough so this will have to wait until next time…

Technorati Tags: Financial Spread Betting, spread betting account, spread betting broker, spread betting companies, spread betting companiy, spread betting firm

For my first post I want to talk about why Financial Spread Betting appeals to me and why it may appeal to you. Please take some time to read the risks involved around Financial Spread Betting.
 
It is easy to get the hang of…
 
While it may seem tricky when you first have a look at financial spread betting, once you gain a little experience it becomes really easy to get to grips with. As we will talk about later, there are many different markets that you can trade using financial spread betting and once you learn the basics in one, the others become easy to master too.
 
I will be running through the basics of financial spread betting in my next post.
 
Little capital required to get started…
 
The great thing about financial spread betting is that you don’t need a lot of capital to get started. You can start with a couple of hundred quid and the reason for this is leverage (which I will come back to) plus you don’t have to pay a fixed commission on each trade.
 
The financial spread betting brokers make their money in the spread of the trade. And the spread is the same size no matter how large the trade.
 
I found that when I was trading shares that you need to trade in sizes of a couple of thousand pounds in order to minimize the impact of the commission. My share trading account charges around £12 per trade. Now if I just bought a thousand pounds worth of shares, the shares would have to go up 2.4% (because you pay to buy and sell) in order to break even (excluding stamp duty).
 
Financial spread betting has become a more competitive market over recent years so financial spread betting companies have actually had to start offering more value to attract clients. As a result you no can trade from as low as 50 pence per trade.
 
Lots of markets to get your teeth into…
 
Financial spread betting is a great way to expose yourself to a vast number of different markets. You can do all this from a single financial spread betting account.
 
Here are some of the different markets you can trade… Individual stocks (both domestic and foreign), indices, currencies, commodities, interest rates, bonds and house prices. I have some strong views about house prices and I will be showing you how I will be using financial spread betting to try and profit from changes in house prices.
 
Going short…
 
As we know, markets don’t go up all the time. With financial spread betting one strategy is trade in the direction of the market. If the market is going down then you don’t want to be long. But you also don’t want to not have a position as you will be losing out on potential profits.
 
This shorting that financial spread betting allows means you can hedge your positions. Say if you have a large stock holding in a company and you had bearish feelings about it in the short run but didn’t want to sell, may be it is in profit and I didn’t want to incur capital gains tax, you could open a short position using Financial Spread Betting and hope to make some profit in the short term.
 
No Tax…
 
Current rules relating to financial spread betting mean that you don’t have to pay tax, neither capital gains or stamp duty. Now this was true at the time of writing this so always check with your local tax office to ensure that that you comply with the financial spread betting tax laws.
 
Reducing currency risk…
 
I like to buy stocks in the US. Now because I buy in dollars my profits will be affected by the relationship between sterling and dollar. Now at the moment I am quite negative about the pound and have done well from stocks increasing and the dollar increasing at the same time. There are other situations where I don’t want the double exposure. Imagine there was a currency worse than Sterling (do your best to imagine!). I would be reluctant to buy shares in that currency because even if the shares did well, the currency devaluation may give all my profits back.
 
Leverage…
 
One of the great advantages of financial spread betting is leverage, and often markets have margin requirements of only 3%. Now I will be going into how this works in a later post mainly covering the risks of financial spread betting. But just to give you flavour now, leverage allows you to exaggerate you profit as well as your losses. It is essential that you fully understand the concept of leverage and how it will affect your trades. Don’t get me wrong, leverage is good but only when you fully understand and you have taken all the necessary precautions.

Technorati Tags: Financial Spread Bet, Financial Spread Betting, Financial Spread Betting UK, Financial Spread Trading