Learner

A video from our partner SpreadEx explaining what spread betting is and how it works. 

 

A look at how you can trade on the global markets, look to turning a profit on this exciting tax free trading.  You can speculate on the movement of the prices of financial assets such as shares, indices, forex, commodities or interest rates. You will be offered a spread based on the value of the underlying market.  Click on the link to read more. 

 

Financial Spread Betting companies – How they make money?

Level

Learner
Intermediate

Financial Spread Betting companies – How they make money?

In Financial Year 2015 IG Group Holdings published in their annual report that they earned a revenue of £388.4m ($513.9m) from global trading. Now, the first question as an investor, would surely behow does spread betting earn money and make profits for their shareholders.  They don’t charge any brokerage to their customers and trading is effectively commission free.

Revenue from the Spread:

Reducing the Cost of Your Risk Management

Spread betting and CFD trading are high risk and so good risk management is important.One way of improving your risk management, is to add Stop Loss orders or Guaranteed Stop Loss orders to your trades.
These orders are designed to limit your downside without limiting how much you can make on a trade. Both types of Stop order have their drawbacks but it looks like some spread betting companies are improving how these orders work for investors.

Level

Learner

Spread Betting the FX Currency Pairs

An important factor when spread betting the forex markets is the types of currency pair you choose to trade. For example, specific pairs may be significantly moved by commodity price changes (JPY and oil being a classic example). At certain times of day some pairs may suffer from low liquidity and wider spreads.
So what are the 3 main types of currency pair?
Spreadbetting FX Currency Pairs
 
1. Forex Majors

Level

Learner

As spread betters continue to learn about the broad diversity of assets that is available for trading, we have seen a massive rise in the popularity of currency trades.  Financial trading is not just about stocks anymore, so it is a good idea to have an understanding of how different asset classes operate.  Currency crosses have some differences when compared to stocks and commodities because the value of one currency is always expressed in terms of its relationship to another currency.  In other words, a currency has no intrinsic value.  Any definable value will always depend on the secondary currency in the cross.

Reading A Forex Quote

Chart Example:  EUR/USD

 

Let’s start with a chart example in the EUR/USD.

What information can be seen in the chart above?  Since the Euro is the first currency in the pair (the base currency) and the Dollar is the second (the counter currency), any upside moves in the chart would should strengthen in the Euro and weakness in the Dolla

The chart shows the Euro valued at just under 1.25 per Dollar.  We can see that prices rising steadily through May of 2014, only to fall sharply in the following months.  This means that the Euro was in control until roughly the middle of 2014 but then started to show significant weakness shortly

Over the last few years, forex trading has surged in popularity.  But some of the terminology can seem difficult to understand.  Here we look at the pip, and define its place in a broader trading strategy.
 

Forex Markets:  The Basic Units

 

When we think of spread betting, stock trading is usually the first thing that comes to mind.  But it should be known that not all stock trading involves buying stocks.  Short selling gives spread betters the opportunity to profit from declines in stock valuations, so this is a strategy that should be considered whenever the outlook for a given company starts to deteriorate.  To be sure, most spread betters specialize in either long or short positions.  But there is nothing wrong with using both approaches as part of a broader strategy.  Here, we look at when a trader should be looking to buy or sell a company’s stock.

Long Positions -- The Bullish Stance

 

When we are starting out in spread betting, it can be easy to get caught up in the excitement of fast moving markets.  But it is important to remember that no real money should be put at risk unless you have properly analyze the relevant factors that will help you determine which direction the asset is most likely to travel. 

 

This, of course, can be a difficult task and there are many different ways of approaching your market analysis.  The two most common methods (the ‘Ying and Yang’ of spread betting) can be found in technical and fundamental analysis.  But there are some common misunderstandings that are often seen with respect to both disciplines.  Here, we will look at some of the most important characteristics of each approach so that traders can decide which is best to use when looking to determine a trading bias for an active position.

 

Charts Tell An Important Tale

 

Generally, traders have four choices when choosing the type of chart to watch when conducting technical analysis of an asset. These include line charts, bar charts, candlestick charts and “point and figure” charts.

Bar charts add information by showing vertical lines as each interval. The top of each line is the high of the period, the bottom is the low. Short horizontal lines are added, which show us the open (left horizontal line) and the close of the interval (the right horizontal line).

The candlestick chart is a slight variation of the bar chart. The vertical “wick” shows us the high and low of the period. The body of the candle shows us the open and the close. The color of the candle allows us to quickly understand how prices behaved during the period.

Point and figure charts are much less common today. These charts do not show volume (relevant for stock traders) and aim to remove the impact of time and periods of consolidation. Today, most traders rely on candlestick charts to construct a trading bias.

“Technical analysis” is the term used to describe the methods traders use to identify overall market trends and potential trading setups, based on an asset’s price history.

When trying to make an analysis of the value of a security, there are two general approaches most investors use: Fundamental Analysis and Technical Analysis. A “fundamental analyst” looks to understand the characteristic qualities present within a company or other tradable asset.