subject: Simple Ways to Trade the Financial Markets [print this page] With the global economy in recovery mode, many people are still questioning how the financial markets got so out of control. They are also questioning something a little closer to home, their own finances.
Tax efficiency, planning investments, diversifying existing investment portfolios, opportunities in fluctuating markets are all priorities. After the credit crunch everyone should understand the necessity of planning ahead.
In this search for improved financial planning many people are turning away from bonds and pensions and considering newer forms of trading that provide new opportunities. Spread betting offers some interesting features and is worth considering as part of your investment strategy.
When speculating though you should always remind yourself that the markets can go down as well as up. With spread betting you can lose more than your original stake or investment.
Why Financial Spread betting?
Financial spread betting solves a lot of problems and this is especially true when it comes to access to World markets and the simplification of tax issues. There are some useful benefits:
1) As spread betting does not involve the transfer of ownership rights, you are simply speculating on the future value of a market, as such trades are not liable for stamp duty, income tax or capital gains tax*.
2) A key advantage is that spread betting offers a wide variety of financial markets on which you can speculate including commodities, indices, currencies and equities markets.
3) I like that you can close a profitable trade and bank a profit but also that you can close a losing trade and limit your losses. Being able to part-close a trade also offers an interesting angle, i.e. closing part of your trade but keeping the rest of it open. This can be used to help manage your risk.
4) You can speculate on markets to go up but you can also speculate on them to go down.
5) The fact that some markets can be traded 24 hours a day, 5 days a week, sets spread betting apart from more traditional stock trading.
6) Another advantage is that there are a wide variety of ways in which to make trades; online, over the phone, or even on some new mobile applications.
The Financial Services Authority (FSA) regulates the UK based spread betting companies. This tends to ensure a certain level of service and, more importantly, consumer protection. With regulated firms like Spreadex and FinancialSpreads.com you can trade certain markets 24 hours a day, including key Forex and Stock Market Index markets. You can also trade more traditional markets such as Gold, US and UK shares and so on.
So whilst there are many plus points, you also need to remember the potential downside. Financial spread betting does carry a high level of risk. Before trading, ensure that spread betting matches your investment objectives. Familiarise yourself with the risks involved. Seek independent advice if necessary.
* According to UK tax law, note that tax law can be changed and may differ depending on your personal circumstances.
