Financial Spread Betting News Information Tips

Mansi Aggarwal asked:




Spread betting is a complicated venture; the statement is nothing but a popular misconception. Proponents of this form consider it to be real easy, once the new player has understood the concept. It enables you to win or loose money depending on how close off or far you are in your betting. Spread betting can be an exciting way to win or loose money, either in casino or while playing online. Win or loss depends majorly on your grasp of the understanding of the betting process.

One of the interesting factors of spread betting is that it allows you to place bets on just about any sport from football to horse racing and at the same time you can place bets on the ever changing stock market.

People have an option on where do they wish to dip in the world of online betting. It could be in a real casino or an online gaming site. In fact there are hundred of sites also offering free training sessions and tips for players new to the world of spread betting.
However once you are well versed with the basics of the game there are limitless venues where you can venture in this world. However like any other form of gambling, this too can be highly negative in yields and thus one should play only moderately, according to the financial resources you have. The game in general, is meant to be enjoyed and can yield an exciting time when played with someone educated in basics.

Like all other gambling games spread betting too has its own historical background.

Spread betting evolves from the basic qualities of gambling, placing money on the outcome and win or lose depending on that outcome. The uncertainty of winning or losing is the very reason for the addictive nature of this game. While in other forms of gambling win or loss depends on the outcome of one game, in spread gambling you may potentially win no matter what the final score. The actual numeric outcome of the game or market has no effect on you win or lose. You will win or lose as long as you bet correctly in the higher or lower margin of the outcome.

Much like other forms of betting, spread too has some bets, which are more popular then others. Some of the most wide spread betting occurs in Europe, where the well spread soccer circuit provides exciting games amply throughout the year. However with so many sports and competitions to bet on, it is hard to pin point any one form as the most popular focus. Besides games spread betting is particularly active on the financial market as well.

People spread bet on the financial markets in hopes of increasing their income or making up for the losses.

Information about betting could be found out by a number of ways. If you are decided on betting, find out as much as you can and know more as nothing here works better then an informed choice. Spending some time with someone experienced in the world of spread betting can be beneficial as you get to know the ins and outs of the game better.

Carla

William Potter asked:




The most common question I hear around trading Contracts for Difference is what is the best time frame when day trading CFDs. Today we’ll have a look at the three most important factors to consider when finding your ideal time frame to trade CFDs.

1.What size wins compared to your losses are you after?

2.Always use three different time frames to trade safely

3.Share CFDs versus Forex or index CFDs. The Various time frames to consider

What size wins compared to your losses are you after?

One of the most critical and overlooked component to day trading success is identifying the appropriate win:loss ratio or what some people refer to as risk:reward ratio. Every day trader needs to have the idea firmly planted in their mind of how important it is to locate day trading opportunities where the chance of reward is the least 1.5 to 2 times the size of their risk.

By keeping this ratio firmly planted in your mind it will ensure you locate high probability opportunities and totally disregard the need to trade just for the sake of trading. Trading for the sake of trading not only loses you valuable time and money it can drain your confidence level to the extent that you hesitate or are reluctant to jump on any other trade. In light of this you want to select the time frame that gives you ample opportunity for profit once your setup has been established.

Using three different time frames to locate high probability day trades

It is vital for day traders to have a success ratio or the probability of winning in excess of 60%. This comes as a result of trading over a short time frame thus reducing the chance of letting winners run. In order to locate high probability set-ups that win more than 60% of the time you would be best to identify short term, medium-term and long-term time frames to put the chance of success in your favour.

If you trade using a 30 minute chart you would be best trading in the direction of the trend and having the five minute chart and one hour chart trending in the same direction as your 30 minute chart. The five minute chart will identify the early set up, the hourly chart will ensure you are trading with the most dominant trend and you can use the 30 minute chart to time your entry. The combination of three different time frames will put the odds of day trading success greatly in your favour.

Day Trading Share CFDs versus Forex or index CFDs. What time frames to consider

Depending on the type of CFD broker you use and the charts they give you access to, you will find the best time frame for day trading share CFDs is to use the one minute chart for the first 35 to 40 minutes, then move to the two-minute chart over the next two hours and move into the close using a five minute chart. When trading Forex or index CFDs you will find ample opportunity and liquidity using anything from a one minute chart up to the one hour chart.

Samuel

Alex Ola asked:




The art of speculating on asset prices has been around for centuries. From the days of the Dutch Tullip to the more recent internet stocks boom and bust, people have been willing and able to place bets on the outcome of financial events and fluctuations in the prices of stocks and shares, bonds, currencies, and the various commodities including gold and oil.

While the actual process of buying and selling financial instruments remains largely the same as it has always been, the instruments available to investors are constantly changing. Indeed, such changes or financial innovations as they may be referred to have been the bedrock of advanced economies with sound financial institutions.

In recent times, one of the most notable and innovative products to enter the private investor arena has been financial spread betting. This derivative instrument originated in the United Kingdom in the 1970s, and having started out as the preserve of financial wiz-kids, it has become a mainstay among private investors from all walks of life.

Essentially, a financial spread bet is no different from a derivative that moves in line with the price action of the underlying security, be that stocks and shares, commodities, various currency pairs, stock market indices, and government bond benchmarks.

The major advantage of financial spread betting as it is currently structured is the fact that profits are tax free. Of course, as the spread betting brokers are always quick to point out, tax laws are subject to change. But for now, the exemption from capital gains tax which can be as high as 40 per cent in the UK and Ireland makes this a potential lucrative and attractive vehicle for profitable short term traders.

The key word here is ‘profitable’ since freedom from capital gains taxation is irrelevant if you have no trading profits to protect. But for those who earn substantial returns on their trades, being able to keep a further 40% of returns is certainly a big advantage.

This tax-free attribute has meant that spread betting has enjoyed tremendous success and popularity in various jurisdictions including the UK and Australia.

Of course, despite its many advantages, spread betting remains a specialised activity that involves a high level of risk and, as a trader you may lose more than your original stake due to the leverage effect. Consequently, it is not suitable for everyone.

Moreover, spread betting is not always legal depending on your country of residence.



Sue

Stacey Harris asked:




The holy grail for anyone looking to trade is understanding how to make a profit. The big banks have just finished their reporting season and in many instances we’ve seen that the doom and gloom of last year is now slipping away, so how do their traders manage to make their profits – and what can we learn from this? Below we outline four ‘golden rules’ that could offer some insights to successful trading.

1) Always understand your market. A range of fundamental factors will have the potential to move the price of an asset and it is always useful to be aware of these. As an example, a change in interest rate policy can impact exchange rates whilst earnings news will directly influence a company’s share price. If you’re looking for a longer term trade, you should give some thought to just how volatile the market can get while you have an open position and either adjust your stop loss accordingly – or perhaps close out the trade for a day or two.

Example: Legal and General came out with half year results on Tuesday 4th August. The share price quickly plummeted over 12% as traders reacted to news of a dividend cut and a 92% slide in profits for the first six months but a rebound followed in an hour or so as the detail was digested, leaving the stock little changed over the first half of the week.

2) Don’t spreadbet in the short term. Investment banks don’t make the bulk of their money buying and selling on a minute-by-minute basis for a 1p or 2p profit each time, but rather by taking a considered opinion on where markets will move in the longer term. Although frequent trading may present some small profits, the temptation to panic and cash out too quickly has the potential to significantly limit returns. Many people are initially put off trading because they can’t sit their and watch the screen all day – but you don’t have to. If a longer term view is taken on a market and risk management tools such as stop-losses are used, there is no need to fret about what is happening second by second and this can end up being a far more disciplined, stress free approach to the markets

Example: The FTSE-100 will move up and down in rapid succession over the course of the day, but will tend to trend in the longer term. The index is currently sitting 1200 points – or over 30% higher – than its March lows. This shows the erratic price movements on a minute by minute basis and with this comes the potential to realise only small parts of any rally.

3) Understand your risk and spread bet accordingly. Risk management is important in any trading strategy and especially when you are using a leveraged product such as spread betting. When you place a trade, you should also decide where to take your profits and where you are comfortable to walk away from a losing position.

Example: On July 17th the British Airways share price reached 140p for the first time in over a month. Confident that the stock was undervalued and that support would now be seen for the business, you open a spread betting account, place ?250 on deposit and buy at ?10/point. This means, for each 1p the share price rises, you profit by ?10 and for each 1p the share price falls, you lose ?10. The share is now trading at 160p, so you should be holding a ?200 profit (?10/point multiplied by the 20 point movement), less financing charges which on this trade would run to around ?3 but the share did trade lower towards the end of July. Whilst taking advantage of the leverage available from trading derivatives, you should also ensure that you have an adequate buffer or cash cushion in place to prevent any open positions being stopped out. In the above example, trading ?10/point on a ?250 deposit would generally be considered high risk and a smaller position would be a more prudent way to try and ensure profit in the longer term. Even at ?1/point, the above scenario would have given close on an 8% return on the ?250 initial deposit over a three week period.

4) Diversify. Don’t put all your eggs in one basket – create a portfolio that will offer you the opportunity to have exposure to a range of different assets. Again this is core to any prudent investment strategy and rather than putting your faith in the fortunes of a single instrument, a degree of diversification is incredibly useful. It is worth being mindful of the constraints above – don’t diversify so far that you cannot keep track of the fundamentals – but looking to make a return from maybe 5 or 10 different instruments means that even if you pick a few bad apples, you still have a fighting chance of realizing some profit. One of the beauties of trading markets using spread betting is you have access to a wide range of different assets: shares/commodities/currencies etc directly from one account, making it very easy to spread your risk and monitor any open trades.

Remember that financial spread betting is a leveraged product and can result in losses that exceed your initial deposit. Spread betting may not be suitable for everyone, so please ensure that you fully understand the risks involved.

Veronica

Andy Richardson asked:




Given all the negative karma surrounding financial spreadbetting during the banking crisis and collapse of shares and huge profits being made on those falling shares by shorters, I was fully expecting the government to retaliate by dramatically increasing the corporation tax that spread betting providers pay tax, which, presumably, the bookie adds to the cost of the spread when you take it out.  But, no……seems successive governments have either forgotten that this tax exists or….well, or what?!

How are Spread Betting Winnings Taxed?

Currently spread betting is classed as gambling in the UK and Ireland and all gambling gains  are exempt from taxes because it is taxed by gambling tax, currently 3% on financial spread bets, and paid by the spread betting firms.  Of course they could well up the 3% to 5% or even 10%, which would put it on a par with sports betting and that would be passed onto us.

Implications / Repercussions of a change in Tax Status

However, I don’t see a difference between spread betting and buying physical, beyond the fact one is leveraged and one isn’t. If HMRC were to take that view as well then they would have to put financial spread betting on a par with physical e.g. capital gains, and we know they won’t do that because too many people lose. Outside the providing a service issue, I can’t see how they could ever put buying Barclays on a spread bet for income and have it for capital gains on physical; doing so would simply wipe out spread-betting overnight as income tax is higher than CGT. Besides, that’s illogical. So could they make all physical for income? Yes….that they could do but would they?

However, I feel quite confident that for now spread betting winnings don’t need to go on the tax return.  I’ve even contacted IG Index this moring about this tax issue and they assured me that in the UK any spreadbetting winnings are totally tax free. They also pointed out that the same works the other way, no spreadbetting losses can be used to offset tax

I know I shouldn’t discuss politics on here, and I know our politics are not the same but even I, hardened capitalist that I am, can see that this Labour Government made a very strange decision when they dropped CGT to 18%. Makes no sense. I expect CGT to return to marginal tax rates sooner rather than later.



Joan

D Bennett asked:




I have never traded CFDs (Contracts for Difference), but increasingly I am finding that my non-US clients have been attracted into trading by companies marketing CFD instruments.

I say non-US companies because I understand that CFD trading is illegal in the US. I think there may be a good reason for that.

If you trade on a short term basis, you have to become paranoid about trading costs. If you are a long term position trader looking at, for example, a 90 or 100 point gain in a soybean trade, you are not too concerned about a bit of slippage on your entry, and a few dollars either way in the contract brokerage fee will not be too significant.

However, if you are a day-trader, you will be loading up with a lot more contracts looking to capitalize on just a few points of movement. Now slippage and brokerage costs are highly significant and have to be kept to an absolute minimum.

There was a time when a trader off the exchange floor had no chance in this game, but the advent of modern electronic brokerage companies has changed all that. Even though I trade from Australia, my brokerage company has very competitive fees and a platform that executes trades with minimum slippage.

Now, back to CFD companies. A little investigation showed they offer commodity trading in the grains, which is my speciality. What is more, there is NO brokerage fee on the contract, and no interest charge on long term holdings.

This seems too good to be true, but there is a catch. It is the spread. In the real futures market I am usually trading with a half point spread, which means if I buy and immediately sell – or sell and immediately buy – I am down half a point ($25 per contract).

However, the spread I am being quoted for a CFD is about five full points! If I go with them I have to make five points ($250 per contract) on the trade to break even.

No thank you! This could be a good deal for some trading styles, but it definitely would not suit mine. I am looking to be in and out of the market within a few minutes, participating for a short period in intraday trends. This spread would make it totally impractical.

It reminds me of the many forex brokers that popped up a few years ago offering commission free trades. Yes, they were commission free, but the spread back then was five pips! On top of that, there were interest charges payable each day you held the trade over night.

At about $12.50 per pip on the Euro contract, that was quite some alternative to commission! Give me a futures round trip commission of less than ten dollars on a currency contract, plus a nice tight spread and no daily interest charges, any day!

Nowadays, competition in Forex means that you can get two pip spreads in the major currency pairs, which is not too bad. But beware when the market moves quickly!

You see, if you trade with Forex or CFD companies, you are not in the real market. You are bidding in a market they make. They are in the real market and they make sure that they offset every position you take to their advantage. If you happen to hit a bid/ask in a fast moving market, and they can not offset it to their advantage, it will not be accepted. You will get a re-quote on the price.

The CFD may be illegal in the US, but there are better instruments available for the investor. For example, single stock futures (SSF) compete directly with the CFD and have a lower cost structure. Of course, international investors can access SSF products too.

I advise you to be very careful about assessing your trading costs before embarking on CFD trading. Carefully consider the alternative of trading in real markets with a transparent cost structure, where competitive pressure from thousands of participants keep trading costs to a minimum.

A key attraction of CFDs to investors is that they are leveraged instruments, but do be aware that there are many other leveraged financial instruments available to the trader.

Face it, all that CFD advertising and those free seminars must be paid for by something! Believe me, day trading is a tough business. An absolute essential is to minimize your costs. Look at every investment vehicle through the cost prism before deciding which path to take.

Lillie