Fx Trading And The Weak Looking Euro
While equity markets remain moribund the currency markets have been the place to trade
. The Euro has even hit a new 10 month low versus the Dollar.
Looking elsewhere, the Pound and the Yen are in a similar retreat against the resurgence of the US currency.
Overall poor Eurozone news is not helping. This is quite separate from the Greece, Portugal et al problems. Germany has apparently slipped back into zero growth, or possibly even negative. Such news must be worrying for the various central bankers across the EU and UK economic sphere.
The pot for state sponsored economic support seems almost empty and any growth from the private sector will be severely squeezed by the ever increasing tax burden.
But ignoring the bankers, what could you do if you want to trade the Forex markets?
If I want to trade the Euro/Dollar, or even the Dollar/Peso market, then
spread betting solves a lot of problems when it comes to tax, simplicity, speed and range of options.
Spread Betting is Tax Free. There is no capital gains tax, stamp duty, income tax. Any profits from spread betting are tax free*.
Spread betting offers a wide range of international markets so that investors are not just limited to traditional stocks and shares. You can trade the foreign exchange pairs but you can also speculate on stock market index values, commodity prices and interest rates.
Importantly for markets like Euro/Dollar and Pound/Dollar and even markets like Oil or Gold, spread betting lets you trade in either direction.
If you think that the Pound/Dollar FX pair will go down you can speculate on it to go down. If you think that the Pound/Dollar FX pair will go up, you can spread bet on it to go up.
If you speculate on stocks and shares in the traditional manner then you generally incur commission charges and/or broker's fees. With spread trading there are no such fees.
From an investment strategy perspective, the fact that some markets can be traded 24 hours a day sets spread betting apart from more established stocks and shares trading. The futures floors and stock exchanges might be closed but you can still spread bet on a variety of key markets.
Companies like
InterTrader and Financial Spreads let you trade over 20 key FX markets throughout the night.
So whilst there are many positives, you must also understand the potential disadvantages.
With spread bets you can lose more than you initially invested. Please ensure that spread betting matches your investment requirements. Spread betting carries a high level of risk. Familiarise yourself with the risks. Seek independent advice where necessary.
* According to UK tax law. If you pay tax in a jurisdiction other than the UK then this may be different.
by: Daniel Jones
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