July 5th, 2010
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
April 30th, 2010
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