subject: Financial Trading For 2010 [print this page] As the world slowly recovers from the credit crunch and we look back at what went right and what went wrong, people are increasingly looking to take control of their finances.
It has become even more desirable to diversify across a wide variety of markets, become more tax efficient and plan ahead for the future.
An increasingly common form of trading that people are turning to is spread trading or spread betting. The speed at which you can trade, the number of trading opportunities and easy access to the markets make it worth investigating further.
There are downsides to all forms of investing and with spread trading you need to be careful because you can lose more than your initial investment.
So why do people spread bet? There are a good number of benefits.
There is a large variety of markets on offer. You can speculate on thousands of markets from the popular Dow Jones Index and Euro/Dollar exchange rate, to the not so popular Wheat, Dollar/Kroner and Interest Rate markets.
Another benefit is that you can close a losing trade and limit your losses but also that you can close a winning trade in order to bank a profit. Being able to part close a trade can also offer opportunities, i.e. closing part of your spread bet but keeping part of it open. Again this is an important risk management feature that can help restrict losses and lock in profits.
Spread betting can be a very convenient trading format. Most trades are made online but you can also trade over the phone and even through mobile phone applications. Certain firms even let you trade markets like the FTSE spreads and Pound/Yen throughout the night.
Where should you trade? The Financial Services Authority regulates the spread betting firms based in the UK. This helps to ensure a certain level of consumer protection. Some offer trades on thousands of global markets.
Also, a number of firms offer the usual benefits of letting you trade outside market hours. Companies, like Financial Spreads, will also let you trade markets such as the FTSE 100, DAX 30, Crude Oil and Gold from Sunday evening all the way through to Friday evening. Genuine 24 hour trading.
Whilst there are many positive aspects to spread trading, you must also remember the downsides.
Spread betting carries a high level of risk. You should only speculate with funds you can afford to lose. Before trading, please ensure that spread betting matches your investment requirements, familiarise yourself with the risks involved and, if necessary, seek independent advice.
Are there any other considerations to take into account? I have seen many trading tips over the years, some more useful than others. Here are a handful of the more common ideas.
Before making any trades, it is useful to have a trading plan. Consider how much capital you are willing to risk, the markets you are going to trade and the return you are aiming for. This can help you make more informed trading decisions.
Try to trade the markets and sectors that you know. If you do not know anything about the foreign exchanges markets it's best to avoid them. If you are most familiar with the commodities markets then that is a good place to start your research.
Finally, it is worth having a look at a spread trading practice account. These are free accounts with virtual funds. If you are less familiar with this form of trading then a little practice should help you understand the positive and negatives as well as the various types of bet you can place.
by: Adam Jepsen
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