Keen to have a go at financial spread betting? You came to the right place. A highlight of financial spread betting is being able to trade in a wide range of market types and geographic locations.
Once, dealing in foreign shares could be logistically quite difficult, but the Internet has changed all that by giving traders online access to markets in different locations and in different time zones.
Financial spread betting takes this one step further by allowing you to deal in products from all around the world from a single trading platform — which means you can build trading strategies for just about anything. Commodity bets enable you to trade products like crude oil over a long trading day, which makes these spread bets very convenient.
Commodity bets also offer very good portfolio diversification for traders. Foreign exchange FX, Forex bets: This is a very popular trading tool offered by most providers.
Foreign exchange spread bets are available to trade 24 hours a day, often six days a week, so you can trade at any time that appeals to you. Index spread bets have become very popular because they allow traders to take exposure to the wider market in a single trade by placing a bet over an index. Index spread bets are typically available to trade all day and much of the night. Interest rate or money market spread bets enable traders to access a market that most traders may not have dealt in before — the interest rate securities market, with a particular emphasis on short-term notes and longer-term bonds.
Interest rate bets can offer real benefits to traders in the form of diversification. Share bets enable you to trade the price movements of domestic markets and most of the larger foreign markets. A wide range of financial spread betting providers compete for your money in the UK — from specialist firms to stock brokers, financial advisers, banks and bookies.
On the upside, the number of providers on offer means they need to compete harder on price and service levels to keep your business. Price — the width in points in the spreads on popular markets — has become an increasingly competitive aspect for brokers, with many now offering only one point or even zero point trading on indices.
In addition, margin rates vary. Some firms offer more education than others. This can include webinars if you live too remotely to get into a major town. Many of the leading brokers now offer proprietary trading platforms, but some are better than others. Increasingly, the platforms are web-based, but older versions require downloading onto a computer.
Other firms use third-party trading software. In the last few years mobile trading has become an important factor in spread betting, with some brokers reporting over a third of their bets now coming in via mobile devices. Brokers tend to launch trading apps for the iPhone and iPad first, and then follow with Android after these have been successfully road-tested. Some brokers are better at honouring your stops than others.
Some now offer guaranteed stop losses. One of the best ways to check out how good a provider is at executing stops is to talk to other traders online — there are plenty of trading forums where you should be able to find current and former clients of most of the UK spread betting firms. Some firms now offer demo accounts that let you trade with play money, helping you to hone your skills and learn on their trading platform.
Depending on your provider, you may receive the software for free or pay a fee. Some brokers charge for the software, because they need to pay the company that provides them with the software. However, charges are often negotiable and depend on how much business you do with the provider during a month. The more trades you make, the lower the software charge you pay. The following roundup highlights some of the key market and economic factors that traders look at when considering whether to buy or sell commodities and interest rate products:.
Nothing moves energy prices more quickly than geopolitical tensions. The market immediately assumes that supplies are going to be limited, so prices rise. This report outlines the status of US supplies: Seasonality broadly impacts on prices too, particularly the northern hemisphere winter. If the weather is colder than expected, demand for heating oil rises, pushing prices higher.
OPEC decisions also impact oil prices. Much of the wider price impacts on grain prices come from the stocks that are available at the end of the growing season. The lower the stocks, the higher the price. The US Department of Agriculture releases crop reports regularly to help with estimates. Not surprisingly, the weather impacts on prices too, with less-conducive growing conditions increasing prices due to short supplies.
In general terms, the higher the overall level and expected future levels of global economic activity, the more industrial metals will be in demand. When you consider that industrial metals have such a wide range of applications, you may wonder how countries can achieve economic growth without them. Some of the same factors that affect the grain market impact on the livestock market. A colder season can see cattle gaining less weight, which makes them less valuable to farmers.
Demand for precious metals can come from the industrial side of the market, the retail side of the market and from investors looking to store value. Some of the key holders of gold looking to store value are the central banks around the world. Central banks choosing to buy or sell gold can have a large impact on supply and demand. The state of inflation globally can also have significant impacts on gold prices as other participants in the market try to hedge against weakening currencies.
Inflation is one of the major factors that impacts on the yields paid by treasuries. This relationship means that as the price increases, the yield decreases, and vice versa. This is referred to as an inverse correlation. If inflation rises to 4 per cent, your real return is 0 per cent.
As inflation and, equally importantly, inflationary expectations increase, so too do treasury yields to compensate for the negative impact of inflation. After you decide which type of financial spread betting provider fits the bill for you, you need to examine the ways in which you can manage your account and your trades.
One of the main areas of spread betting that new traders often find a bit of an eye opener is the wide range of different orders available. An order is an instruction from a trader to the provider to buy or sell a specified item in a market. Such a huge error takes the fun out of your day very quickly indeed! A market order is an order to buy or sell immediately at the current market price. Market orders are probably the most commonly used orders because they allow you to get in and out of the market immediately.
A stop order is an order to buy when the price has climbed to or above a specified stop price or to sell when the price has dropped to or below a specified stop price. The stop order is one of the most important orders available to traders because you can use this order to manage your risk by selling automatically when the price reaches a level that you nominate.
A stop loss order does exactly what the name implies — it stops your loss. The broker executes a contingent order only if it is instructed by you to execute another order first.
Contingent orders are used in a similar way to stop orders. Effectively, you are asking the broker to execute one order only IF another order happens first. If this happens, you are saying, then do this. If your provider offers this type of order instead of stop orders, you can use it as your primary means of managing your risk.
A limit order is an order to buy at no more than or sell at no less than a specified price. You use a limit order if you want to deal at a price below the current level that is, if you want to go long — meaning to benefit from a rising price or above the current price that is, if you want to go short — meaning to benefit from a falling price.
This means that you trade only if the price moves to the level that you nominate. A requote occurs when the market is moving quickly, and the provider does not want to offer you the spread bet at that price. The provider will usually either offer you an alternative price, or simply say the price you wanted to open the bet at is no longer available.
It is rare for this to happen these days, as many of the biggest providers now use highly automated systems for calculated trades. It can also happen if too many traders are taking the same position, and the provider is finding it difficult to hedge this in the market. Guaranteed stop loss orders: Using a guaranteed stop loss order GSLO from a provider helps you manage your risk even more effectively than with a regular stop order, because you pay extra to ensure that if you get stopped out, you know at exactly what price it will occur.
The downside to using a GSLO is that you have to pay a premium upfront whether the provider executes the order or not. An if-done order is an advanced order type that allows you to connect two different orders together, such as a limit order and a stop order.
As the name implies, if one order is done, the other order is placed. Using an if-done order enables you to plan much of the order set-up ahead of time and then execute the order automatically when certain conditions are met. One cancels other orders: One cancels other OCO orders are designed to let you have two connected orders to get you out of the market surrounding a position that you already have.
Most commonly, this allows you to either stop your loss if the price moves against you or take your profit if the price moves in your favour. Understanding the Types of Financial Spread Bet A highlight of financial spread betting is being able to trade in a wide range of market types and geographic locations. Here are the main types of spread bets: Choosing a Financial Spread Betting Provider A wide range of financial spread betting providers compete for your money in the UK — from specialist firms to stock brokers, financial advisers, banks and bookies.
The following info helps you compare providers to make the best choice for your needs. The following roundup highlights some of the key market and economic factors that traders look at when considering whether to buy or sell commodities and interest rate products: Knowing Your Financial Spread Betting Orders After you decide which type of financial spread betting provider fits the bill for you, you need to examine the ways in which you can manage your account and your trades.More...