A: A long position is when you purchase something in the belief that the share will move upwards.
A short position is the opposite but slightly harder to explain ('shorting' is also explained more fully in the next question - 'What is Shorting?'). It 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 its something which needs experience, and real understanding.
A: Buy low, sell high is clearly a great way of making money. Short selling is the opposite of this. Shorters ‘borrow’ shares and immediately sell them in the hope that they will fall, and can then buy them back at a cheaper price when they have to return them.
Sounds complicated? Well, it really isn’t that complicated... Take actual bricks and mortar as an example. Suppose you sold a property for £400,000 and bought it back a couple of years later for just £300,000, you would have made £100,000.
Shorting can be applied to securities, commodities and currencies too, and is nothing new. Speculator George Soros famously made a billion pounds shorting the pound in 1992 and contributing to its infamous exit from the Exchange Rate Mechanism.
A: I run my own trading accounts via spreadbetting and CFDs, I would disagree with the notion that spreadbetting is for scalping as the spreads really aren't tight enough to scalp equities...with CFDs this may be possible.
I like using spreadbetting on futures contracts for FTSE 350 companies as I am generally looking for stocks that are liquid (tight spreads) but also able grow >15% (there is a lot). My timeframe for equities is 2 -10 weeks, and then short term trades on currencies, commodities, indices...etc.
I would recommend spreadbetting/CFDs, but would consider them more of a trader's tool.
As regards people image that spreadbetting/CFDs are very risky, I disagree. Yes they are leveraged products, and Yes (!) you COULD lose more money than what is in your account, but they are best when used in a proper trading setup, with proper money management rules. e.g. when you have worked out ABC plc 1) target 2) stop loss and hence 3) risk-reward ratio, and 4) the amount of your account you are willing to risk e.g. 5%...you can work out how many shares to buy/bet.
Just because you can buy 33 times the amount of shares you can afford doesn't mean you should! Trading is about discipline! For someone new to trading I believe its better to learn about markets by holding shares before you move into spreadbetting as people can start to panic when big losses come up. It's all about psychology and keeping your nerve at times.
I am more of a trader and hence why I like to use more shorter term long/short derivatives rather than holding physical stock.
To conclude -:
A: Actually yes I do...quite a few, and some are SERIOUSLY rich! One person in particular...
She started with £2k and over a period of 2 years nearly lost it and just about came out flat... then she made a few hard decisions, mostly about honesty with herself and discipline... she currently makes about £1- £2k a day and its a bad day is when its only £500. She trades just a few stocks and very rarely holds overnight.
Although I'm not rich I do quite nicely on the whole spreadbetting and that's just little old self taught me. Just because people don't make the hall of fame does not mean they have not made a lot of money trading be it spreadbetting, cfd trading, warrants whatever...
A: IMR is Margin so a 50 IMR means 50 times your stake.
CGSL stands for computer generated stop loss.
quoted from the Capital Spreads user guide -:
'Your automatic stop-loss is calculated as 80% of the funds on your account, or if you have sufficient funds on your account, the system will generate a stop-loss calculated at 80% of the Max CGSL (computer generated stop-loss). If your stop-loss is set at the MAX CGSL level, you can move it closer in or further away by amending your stop-loss'
A: £10 per point on the FTSE, DOW etc, would be per whole point. If it dropped 50pts you'd be £500 up (not quite £500 profit due to the spread).
You can open a daily trade or a futures (forward quarters). These are priced differently and have wider spreads. Quarter periods are from 19th of March, June, September and December.
When it comes to stocks (shares) the point is the penny, not the sub 1p decimal values, though the decimal places are included in the price (if you bet £10pt on a share price and the price moves up .25p then you're £2.50 up.
Daily trades normally expire when the market closes but you have the option of rolling the bet over to the next day for a very small cost. The same is true with the futures. You could sell AL. (not advice) on a December contract, then before the 19th December expiry, roll the bet to the following quarter (19th March). This usually costs about half of the spread.
It's wise to use stops and for an additional fee some companies will allow guaranteed stops. With a guaranteed stop loss you can't lose more than your stake. If the price gaps past your stop pre-open then the extra loss is the SB company's...not yours.
Limits can also be useful -
Say you're short PAG at 280. You think it might drop to 250 but only briefly before rising again and you could miss it. So you set a limit at 250 or just above so that if it hits your trade you would close for that profit...even if it was only that low for minute.
With a spreadbet, to go long you 'buy' and to close that trade you 'sell'.
To go short you open with a 'sell' and close with a 'buy'.
Be very careful with spreadbets...they're a fast way to make and lose money. Use stops and don't allow a position to run too far against you.
It's always a good idea to find companies which are good shorting candidates so that not all your positions are long. Being long only is always risky in case of a downturn in the markets.
A: Correct. You can roll it over at expiry if you want too. It just costs more to have those longer-dated contracts. Also, it takes up more margin.
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