Forex into the Future: A Quick Guide to Spread Betting

2016 has already proven to be a somewhat unpredictable year in terms of market movements and future trends. With continued economic instability throughout the Eurozone and thanks to the potential of a Brexit in the not-so-distant future, many traders are looking for ways to capitalise on such movements while limiting their exposure to unnecessary volatility. One excellent means to satisfy these desires is to adopt a position in the world of spread betting. Let us take a look at some of the major benefits associated with this approach as well as a few key tips to begin trading from a strong foundation.

The Advantages of Spread Betting

Arguably, the most appealing feature of spread betting is that it is associated with the movement of a particular asset. Money can be made regardless of whether the markets are bullish or bearish. So, volatility can be a friend of the trader as opposed to his or her enemy. Some other notable benefits include:

  • No capital gains tax needs to be paid on profits.
  • Trading can occur 24 hours a day and 5 days a week.
  • There are a wide range of assets and indices available.
  • Leveraged trades are common.

Now that we can appreciate the general appeal of spread betting, let us delve into a handful of worthwhile tips.

Long or Short?

The terms “long” and “short” equate to buying or selling a position. Those who believe that the price of an asset or index is set to rise will buy a position (going long). Traders who instead feel that the price is expected to fall will sell their holding (going long). All that is required is for the investor to know (within reason) the direction of the holding.

Leveraged Trades

Some traders will adopt a leveraged holding in order to maximise their returns. This requires a deposit that represents only a fractional amount of the total investment. Should the movement be correctly predicted, the ROI is indeed massive. Still, mistakes can equate to substantial losses. It is best to thoroughly study the risks involved before becoming involved in a leveraged trade.

Understanding the Spreads

The spread of a position represents its current buy and sell prices. Narrow spreads are ideal, for less time will be needed to execute a position once the direction of movement is chosen. Broader spreads will take longer to fulfil and therefore, the investor is exposed to greater levels of risk. With spreads as low as 0.7 pips, CMC Markets provides a wealth of opportunities for astute traders.

2016 could very well prove to be a red-letter year for those who become involved with spread betting at an early stage. Due to the fact that numerous account sizes are available and that commissions are extremely low, sustainable wealth is indeed a real possibility. Those who wish to learn more or who desire a demonstration account should examine the tools offered at CMC Markets in more detail.

Speak Your Mind

*