Trading After The Credit Crunch
As the major economies start to stabilise and the risk of a depression thankfully recedes
, many people are reflecting on a few important issues. Firstly, how did it happen? Secondly, how can you better protect yourself in the future?
Few would argue against the importance of fiscal planning and research. Opportunities in fluctuating markets, tax efficiency and planning investments for the future are all motivating forces.
It looks like many people are turning away from pure funds and pensions and considering newer forms of trading that provide new opportunities.
One style of trading, spread betting, is gaining popularity. When you look at the speed at which you can trade, the number of trading opportunities and take into account the easy access to global markets then, it is worth exploring further.
Of course, as with all investments such as trading shares, funds, pensions, housing etc, you can lose money. With spread betting you can lose more than your initial investment.
But why trade if there is a risk? Spread betting offers a solution that covers tax free* trading and quick access to global markets.
There are many advantages. With spread betting you do not actually buy or sell any assets. You are only speculating on the future price or level of a market. The result is that trades are often accepted automatically or at least in the order of seconds. An important benefit in fast moving markets.
Unlike traditional share trading you can sell a market. Spread betting lets you trade in both directions. You can bet on markets to go down. If you think the Sterling/Dollar rate will go up you can bet on it to go up. If you think the price of Gold will go down you can bet on it to go down.
The nature of investment involves risks to your trading capital. Given the risk, another advantage are Stop Losses which are designed to help reduce your downside by limiting your potential losses and automatically closing your trade at a pre-set level.
Yes, there are a good number of positives but you need to remember the downsides. Spread bets do carry a high level of risk so you should only speculate with money you can afford to lose. Before you trade, please ensure that spread betting matches your investment objectives, make sure you familiarise yourself with the risks involved and seek independent advice where necessary. * Based on current UK tax law, if you pay tax in another jurisdiction then tax law may vary.
Looking for some basic tips? Every seasoned investor has their own rules and tips. Here are a few of the more common, and sensible, ideas.
If you are new to a certain market it can be useful to trade it via a demo account first. A number of firms offer these for free. A demo account simply lets you trade the markets with virtual funds. In other words, it is risk free.
It may seem like an obvious thing to say but make sure you research the markets before you start trading. If you plan to trade gold then appreciate that gold is priced in Dollars and, therefore, the US Dollar exchange rates can heavily influence the price of gold.
So where to trade? The Financial Services Authority regulates the UK spread betting companies. This helps to ensure a certain level of quality or, more importantly, client protection.
There are a number of regulated
spread betting companies that offer thousands of international markets including companies like FinancialSpreads.com and
IG Index. Naturally, both of these firms offer the normal benefits of spread betting including; tax free trading*, trading outside market hours, no brokers fees and no commissions.
by: Robert Thomas
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