A: A long position is when you purchase something in the belief that the share will move upwards. So you take a LONG position on it i.e. buy it with a view to selling it at a higher price later for a
profit.
A short position is the opposite but the intricacies are a bit harder to explain. Basically you take a short position if you believe the price of a share, commodity or index will decrease or go down. You then take a SHORT position on it i.e. sell it with a view to buying it at a lower price later for a gain. In other words here you are effectively mimicking the act of selling securities you do not own in the hope of a fall in price which can later be closed at a profit by buying the shares back at the lower price.
Shorting ('shorting' is also explained more fully in this section - 'What is Shorting?') as a speculative tool is when you have purchased a future or derivative that allows you to benefit from a share falling, or if you borrow shares and then sell them to benefit from a falling price.
 |
|
 |
|
Another good simple explanation would be the following. A short position is when a trader gambles that a share price will fall. Investors take a short position by borrowing stock, usually for a modest fee. They then sell the shares on the open market. If they get it right and the price falls, they can buy the shares back at a lower price, return them to the original owner, pay fees and still pocket a profit."
I do believe going short offers great opportunities to private investors, however it is something which needs experience, and a real understanding of the market workings.
A: Yes, in fact spread betting comes in very useful if you believe a company's stock price will fall as you can use spread betting to profit from any decline. Now, I do realise that making money on a falling stock sounds like an impossible feat to achieve but just like you can make money by 'buying cheap and selling high', so you can make money by 'selling high and buying low' i.e. selling the shares at a high price and then buying them back at a lower price to make a profit. The practice of profiting from a fall in a company's share price is referred to as 'shorting'.
|
Example:
Let's take a look at the chart of Datacash Group PLC (Public, LON:DATA) over the last 3 months.
- 1. We sell at 250p for £5 per point (each penny being equivalent to a point).
- 2. We set our stop loss at 290p (which is above the highest price Datacash has risen over the previous 6 months.
- 3. We watch as the price falls over the next 6 days and decide to 'Buy' the shares back at 200p.
- 4. Profit from the trade = 250p - 200p = 50 points. So our gains amount to 50 X £5 per point = £250. Since our stop loss was set at 290p, we had to deposit 40pts x £5 = £200 [{i.e. (290p 'stop loss level ' - 250p 'sell price') X £5 per point)}= amount at risk] as margin to open this trade.
That amounts to a £250 profit from a £200 deposit, a return on capital employed of 125%, not bad for a week trading!!
A: A spread bet is simply a contract between you and the spread betting provider to exchange the difference in value of a designated instrument such as a share or index when the contract between the two parties closes. The value of this contract is derived from the price of an underlying instrument - at no point do you ever own the underlying security, irrespective of whether you are trading long or short.
A: In spread betting you trade an amount 'per point' of movement of the share, commodity or index as the case might be. The Point, Pip or Tick are different measures denoting the unit movement required on the market you are speculating on to change the gain/loss on your bet by the full stake amount. It is important to note that a point does not always equal a penny - sometimes it is a cents, sometimes a point or even a fraction of a point such as when you bet on an index like the S&P (which for instance is dealt in tenths of a point)
You learn to drive by driving.
You learn to swim by swimming.
You learn to trade by trading.
Go to any professional trading firm, and their training program will broadly consist of 10% theory/trading setups/...etc and 90% live trading...
The time to sit down and analyse is when you are analysing your own trading results.
Use all other outlets (forums, books, etc.) as a means to bounce ideas, learn new things, etc. to compliment your actual trading.
A Pip is a decimal point. Pips are measured to four decimal places. For example, the price £1.01 which reads One Pound and 1 Penny, could be written to four decimal places as follows: £1.0100 = £1.01. Therefore, if you added 5 Pips to this price, the figure would read as follows: £1.0105. Therefore, if the market price was to increase from: £1.0101 (One Pound, One Penny and 1 pip) to
£1.0115 (One Pound, One Penny and 8 pips). The market price would have increased by 14 Pips. So when a trader says they made 50 Pips today, then you know they mean that the market price goes from: £1.0100 to £1.0150. Once you master the concept of Pips, you are well on your way to understanding the basic measurements used in the currency spread betting.
For instance -:
For Next (NXT: LON) -> trade per point on Next is for each penny movement in Next's share price
For the FTSE or Dow -> a bet per point would be for each point movement in the FTSE or Wall Street contracts, this means that if you went long on the FTSE at 10 pt per point when it was trading at 4200 and the index moved up to 4250, then your gain would amount to 10 X 50 = £500
Tick usually denotes futures contracts with a base of 100 like Bunds or Short Sterling while pips are used in forex trades.
A: Just the penny movement for shares.
A: Intraday positions refer to spread bets that are opened and closed within a 24 hour period. This 24 hour period starts everyday after the end of day process at 10pm London time. Overnight positions are positions that are still opened after the end of day process at 10pm London time.
Hope that answers some of your questions but feel free to send me queries, comments or concerns at traderATfinancial-spread-betting.com or by filling in the form below :-)
Page is: 148Please do not copy/paste this content without permission. If you want to use any of it on your website contact us via email at 
traderATfinancial-spread-betting.com (remove the AT and substitute by @).
