Seeking Profitable Opportunities in Spread Betting

Whether you are a novice trader, or a seasoned professional, it’s always a good idea to explore additional means of generating income from viable investment options. Spread betting is one of the most interesting ways of dabbling in the financial markets. Traders are presented with a myriad of opportunities in indices, commodities, stocks, and currency pairs. Unlike conventional investments such as those offered by Fidelity or Ameritrade, spread betting companies do not require traders to take ownership of the underlying asset. It is a form of derivative trading where speculation on price movements of the asset takes place. With spread betting, it is possible to immerse oneself in the financial markets and profit whether markets are moving up or down. It is the volatility of markets that comes into play and generates profits or losses accordingly.

Why is Spread Betting Such an Interesting Proposition?

Anyone who understands the basic premise of regular trading knows the following: The underlying asset needs to appreciate for profits to be generated. This is where spread betting is considerably different. With this form of trading, it doesn’t matter whether the asset appreciates or not. All that’s important is that the trader makes the speculative assessment and is correct in doing so. If you believe that a commodity (WTI crude oil, Brent crude oil, gold, silver etc.) is going to rise at some future point, you go long on the option. If by contrast, you believe that the commodity is going to fall at some future point, you go short on the option. Provided the price movements accommodate for the spread and more, it is possible to generate profits if the trade finishes in your favour.

Why Dabble in Spread Betting Activity?

Of course, there are many other benefits to engaging in spread betting activity. For traders in the United Kingdom there is the benefit of exemption from UK capital gains tax. With traditional stocks and other investments, traders are required to pay capital gains tax – not so with derivatives products. This also exempts traders from what is known as stamp duty. Another benefit of spread betting activity for casual traders is its 24/7 nature. Most of the regulated brokerages like ETX Capital‘s spread betting services incorporate a wide range of trading options. These include currencies trading, indices trading and commodities trading. Unlike conventional Forex brokerages which are limited to currency pairs trading, spread betting platforms offer far more variety.

Leverage and margin requirements are worthy of mention. When you trade financial assets online, spread betting brokers do not require the full value of the trade to be deposited upfront. The margin requirements can range from 2% to 5% of the trade value, meaning that you only need to put down a small percentage of the total trade amount. Leverage can go from 50:1 for new traders to 500:1 for experienced professionals, depending on the brokerage of your choosing. The range of underlying financial assets with spread betting brokers is significant. It is possible to trade the FTSE 100, the CAC 40, the DAX 30, the NASDAQ composite index, the Dow Jones Industrial Average, the Nikkei 225 and many other bourses. Additionally, a wide range of stocks is available including Google, Microsoft, Facebook etc. For spread bettors, it is always advisable to trade an asset that you understand. Typically, this is a currency pair such as the GBP/USD, EUR/USD, CAD/JPY etc. With a basic understanding of the asset and macroeconomic variables, it is possible to forecast future price movements.

Opportunity Cost of Money in a Low-Interest Bearing Account

The respected spread betting brokerages don’t leave their traders hanging. They provide them with a wide range of trading tools, educational resources, and expert customer service to bolster their trading sessions. Knowledge is power when it comes to spread betting, and it is important to use technical and fundamental factors to understand the markets to make informed trading decisions. With such low interest rates at UK, EU and US banks, there is little benefit to investing in fixed-interest-bearing accounts and securities. Rather than having money sitting idly by, there are alternative vehicles for driving up the value of personal disposable income. Since margin is involved, the trader does not need to front the full amount, boosting the profit potential (in percentage and nominal terms) over conventional investments. Of course, the knife cuts both ways and it’s important to be mindful of the downside of CFD trading.

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