Trading Essentials. Understand the nuts and bolts of trading spreadbetting including fees and other charges, margin calls and how spread betting trading platforms work.
How does financial spread betting works? The basics and workings of spread betting are quite straightforward and you should be able to grasp the principles in a very short time. In fact, I’d say that some things that we do in our 9 to 5 hour jobs are much more complex than the concepts of spread betting or CFDs yet we do not hesitate to investigate.
- What is Spread Betting? – Part 1
- What is Spread Betting? – Part 2
- What is Spread Betting? – Part 3
- How to Make Money from Stock Markets Going DOWN
Workings of Leverage in Spread Betting
The Advantages of Financial Spreadbetting
The Costs of Trading: Shares v Spread Betting
Learning to Trade
Opening a Spread Betting Account
Financial Spreadbetting What and Where?
Types of Bets
Placing Spread Betting Trades
- Currency Spread Betting: Trading in Currencies
- Spread Betting Forex: Trading in Spot Currencies
- Spread Trading Stocks and Shares
- Spread Betting Indices
- Spread Betting Commodities
- Spread Betting Bonds and Treasuries
- Sectors Trading
- Binary Betting
- Principles of Technical Analysis
- The Dow Theory
- The Problems with Technical Analysis
- What About the Fundamentals?
- The Importance of the Trend, and how to Spot It
- Learning about Charts in Spread Betting
- Bar and Candlesticks Charts
- Price Scales, Volume and Open Interest
- Time Scales
- Using Charts to Spread Bet
- Bollinger Bands
- Average Directional Index (ADX)
- Average True Range (ATR)
- Triangles, Price Channels and Head and Shoulders
- Advanced Trading Strategies
- Spread Betting Tips for a Recession
- How to Trade in Volatile Markets
- Short Term Trading Tips
- The Confidence Conundrum
- How to Deal with Trading Losses
- Patience and Perception
- Emotional Stability = Key to Success in Trading
- A Winning Psychology
Spread Betting Glossary
- Glossary of Basic Spread Trading Terms: Part 1 (A to D)
- Basic Spread Betting Definitions: Part 2 (E to L)
- Financial Spread Betting Glossary: Part 3 (M to W)
Suppose we have £5k available risk capital. Then, one may only have to deposit £500 (based on a gearing ratio of 10:1). This is usually referred to as utilising leverage to make your capital work harder for you. You can leave the rest of the monies in a bank account accumulating interest. The other key advantage of contracts for differences and spread betting is that you can bet on an instrument falling in value just as simply as one rising in value.
We are often told that spread betting is open to unlimited liability but spread betting providers these days offer a host of risk management tools to control your downside. Stops, limit orders, OCO orders, conditional orders and limit risk account should all help to provide some peace of mind when you can be in front of a monitor. And what with most spread betting providers offering mobile trading platforms these days, there is really no excuse for not being able to monitor your account.
Thirdly, spread betting and CFDs allow you to go short and profit from a market declining in value. Why should we be limited to only betting or speculating that things will go up? Often a stock drops faster than it rises as fear sets in and everyone runs for the door/throws in the towel. Why shouldn’t we be able to go short on say high street retailers who are having a rough time of it?
There is a point at which the financing cost of owning a CFD or spreadbet becomes unattractive compared to that of owning the underlying security. Investors and spread traders should be careful to calculate their long term financing obligations before the cost of owning a spreadbet position outweighs the cost of owning the underlying. Assuming interest rate is charged at 4.5% per annum CFD provider, you can hold a position for approximately 90 days and pay less than the stamp duty!
Fourthly, CFDs are free from Stamp duty. And financial spread bets are free from ALL tax, inclusive Capital Gains. When I first started dealing with shares back in 2004 my 1st yr dealing costs were £616. and realised net profits of £702. When I looked into CFDs I worked out that I would have saved over £300 in costs, through combination of no dealing commission and paying interest on the CFDs. So from then on I stopped trading thru normal shares and went into CFDs and spread bets for a while, initially making good money, before getting too clever and ceding some profits back to the market.
Just a thought as spread bets are tax free but CFDs do count towards CGT. But with good money-management you could invest part funds in high interest account and use the rest for trading. So just take appropriate to do proper research and take the time to understand the instruments you are trading.
We have covered quite a lot of ground in the preceding sections. Don’t try to understand it all at once, particularly if this is your first brush with the sometimes weird world of spread and futures trading. Much of the ‘jargon’ and way of thinking will be new to you, but if you go over it several time in your mind and follow each worked example, through, then you will quickly become familiar with the subject. It took me about six months to get ‘up to speed’
One real trading gives you a RAPID education in spread betting! This concentrates your mind wonderfully, as you see your losses tick up at £100 a time! Also, it is thrilling to see your gains pile up at the same rate.
And remember utilised correctly, financial spread betting and CFDs are an important tool available to private investors and traders. The majority of traders lose because they are not disciplined and either abuse leverage or keep running their losses. The brokers and spread betting platforms are happy as you long as you are trading as that way they get their fees!