Main Features of Spread Betting

Why is spread betting different from other "normal" forms of trading? After all isn't that what any trade or investment decision is - speculating on the future price of a financial instrument? Well spread betting has a number of both common characteristics and distinct features to the usual forms of trading. The key characteristics of spread betting are as follows.

Spread betting is tax free
In the UK, where spread betting is predominantly based, all profits generated through spread bet trading are tax free for UK residents. At the time of writing it is also the case with some other countries like Sweden. This means there are no capital or income taxes payable. This can be a double-edged sword as any realised trading losses are not tax deductible. The tax position of trading gains made via spread betting for traders who are not UK residents is likely to be different, so non-UK spread betting traders should contact the tax authorities in their own respective country to clarify how spread betting gains are dealt with for tax purposes.

Spread betting is a margined product
Spread betting is a margined product meaning that a position can be taken with only a fraction of its full value required as the initial deposit. The result of which is that very large profits can be made from a relatively small initial stake. In order to place a trade, an initial deposit called "initial margin requirement" (IMR) needs to be paid. This margin payment is can be as small as 1/10th or even 1/100th of the full value of what is being purchased. Margin trading therefore allows a trader to take a much larger position than would otherwise be taken with the amount of the initial stake, which can result in much greater profits than would otherwise be achievable. Conversely, it could also mean much greater losses than would otherwise be incurred.

Spread betting is (almost) fee free
With spread betting there are no broker commissions or stamp duty (UK) to pay. Although there are no direct fees payable, spread betting companies, or firms, make their profits from the spread offered, which in most cases nowadays is similar to the spread size on the underlying financial product being traded. However, it is worth pointing out that if a spread bet trade is held overnight there is usually a small overnight financing charge payable.

Spread betting is possible on a vast range of financial products
The majority of spread bet trades are taken on equities (stocks), but because the range of financial products that can be traded via spread trading has greatly increased in the last few years the percentage of equity (or stock) spread bets have decreased relative to other spread trades placed. Other popular spread bet trading products now include Forex (both Spot Forex and Forex Futures); global stock indices, eg, DAX 30 index, FTSE100 index, NASDAQ index, the Dow Jones; individual financial stock sectors, eg, Banks, Telecoms, Pharmaceuticals; individual global stocks, eg, individual companies on the S&P500 or FTSE 250; futures and options; commodities and even interest rate futures. It is also possible to spread bet on the value of house prices!

Spread betting with familiar order types
For most investors the types of spread bet orders will be very familiar. Apart from the usual instant execution order, where the trade is executed immediately, other types of orders include OCO (One Cancels the Other) orders, Stop orders (guaranteed and not-guaranteed, and Limit orders.

Spread betting long and short
With spread bet trading it is possible to go "short", or sell an underlying financial instrument as it is to go "long" or buy an underlying instrument (assuming that a regulator does not prevent short trading as actually happened during the recent financial crisis).

Trade on International Financial Markets with No Currency Exchange Risk
When you place a spread bet trade on a financial instrument for example on stock listed on a foreign stock exchange, you will place a bet, or trade, using the base currency of your chosen trading account (£, $, or €) held with your spread betting company. The whole of the trade will be handled or processed in your chosen currency thereby removing any potential currency risk.

Best Online Stock Trading

What is the best online stock trading ?

If want to be able to trade easily and cheaply, and have good, clear records for taxes you wil need to know what is the best online stock trading companys.


I give you two online alternatives, along with my recommendation.

Stock trading is very enjoyable. I believe that between the two following choices, you will find the best trading company for your needs. I give you best two options because each works for
different trading techniques. Best online stock trading companys:

Zecco gives you the option of free stock trades, along with a forum and a Web 2.0 platform if you are into that type of thing.

Scottrade is established, inexpensive (a flat $7 a trade) and has best online customer service. I have personally used them and they have been great. If you live in any type of suburban or
urban area, there should be a Scottrade office nearby with a broker you can personally contact if you have any questions or needs.

FX Strategy Secrets

Taking Profit

Posted by Jed & kirk Norwood on May 18, 2009 · Leave a Comment

There are several approaches to taking profit in forex trading. For example some traders will put on several lots
on a trade then when the market reaches a predetermined level they will close a small portion of
the trade. They leave on the remainder lots so they can continue to be in the market and gain
profits. Then there are the traders that put on a small number of lots, add to the trade when they
get additional entry signals and when the market tells them that the current trend is coming to an
end then they close all of the positions.

If a trader is making money we can’t say the way they take the profit is bad. As long as we are
trying to make money on a trade why not maximize the profits on that trade. We have been thinking,
when the market reaches the point that a trader wants to take some profit and the market is still
moving why not put a stop loss at the predetermined exit point and let all of the lots continue to
run. There are a couple of ways the trade could be ended with a maximum amount of profit and a
minimum amount of loss.

The stop loss could be moved up as the market moves up to protect even larger amounts of profit.
When the market gives a strong exit signal then close all of the lots on the trade. If the market
retraces then continues in the original direction of the trade, at that point the trade can be
reentered and make profits all over again. We know there is no wrong or right way to make money.
Pick the way that fits your emotional ability, and trading style. In any event continue to make
money and have fun trading.

The Number One Reason For Washing Out As A Trader

The time a trader usually blows up his account comes when he has had a series of good forex trades
over the course of a day, week, or month. He starts to be confident and does not put his stop
on. It is late in the week he is a little tired makes one more trade leaves off the stop and
then the whole market turns and goes against him. He loses all he made and more. He did not
take time to use good risk management.

He is feeling low emotionally and his account is a wreck.

He should not dwell on the big mistake but go back to the basics of his trading plan. Review
the risk management and get back to the discipline that made him money the first part of the week.

When you over look risk management you have a greater risk of washing out of trading than any
other single thing. When you pay close attention to risk management you have the greatest
potential to make it as a trader.

A few small losses will not hurt the big wins that come along on a regular basis. This will
cause your account to grow on a steady basis.

TAKING THE NEWS TO SERIOUSLY

Reading the financial news papers, listening to all the financial television stations,
studying the economic reports, and visiting all of the chat rooms can be a big challenge.
You can lose prospective of why you are trading in the first place if you get caught up in
to much news. It is a good forex strategy to know some of the major things that are going on but to be a
good trader you do not need an over dose of news.

You need a combination of fundamental and technical. I lean more to the technicals.
Some of the things that I see happen to the traders that over dose on news are: Trying
to pick which way the market will go. Getting hooked on an opinion of what is going
to happen and lose all objectiveness as to what might happen. The market moves in
trends and the news will cause little bumps in the direction of the trend. When the
news dust settles the market returns to the major trend it was on. You can get spike
fever, chase the market movement and get caught from both directions in the market.
Even with all the news research one will not be the first to know what the market will
do based on the news alone. So by the time the trade comes along you are trading
discounted news that has already been factored into the price of the market. So By
using news to trade forex you are taking a gamble on which way the market will go.

The Market can make a positive move with bad news and a negative move with good news.
It is all tied to the sentiment of the market the way people react to the news not what
the news is.

Set Yourself Low Forex Goals

One of the common misconceptions that I have run across is that people think that if
you’re not hitting big home runs in your trading that you can’t make much money.
Nothing could be further from the truth. If you continually re-invest your money,
and you risk only a small percentage of the total on every trade, huge returns can
be realized. The following examples are only for illustration, and obviously they
are just hypothetical. I simply want you to understand that the returns can be
exponential without exposing yourself to a dangerous level of risk.

Example 1

Starting equity: $10,000
Monthly return: 6%
Compounded return after 1 year: 100%

At this rate of 6% per month, you would have about $1.2 Million after 7 years.

To break it down further, suppose you needed a 25 pip stop loss and you were only
risking 2% of your total equity. That’s $200 on a starting account of size of
$10,000, which means you could trade 8 minis. If you only made 20 pips net all
week that would be $160 per week, or $640/month, which is more than 6%! You see,
you don’t need to trade a lot, just be patient.

Example 2

Starting equity: $10,000
Monthly return: 10%
Compounded return after 1 year: 300%

At this rate of 10% per month, you would have about $1 Million after 4 years

Remember, have a realistic plan and think longer term. This isn’t a race, and as
you can see, the power of compounding can be very effective, so be patient and set
reasonable goals. All you really need to do is be consistent in the execution of
your trades, realize that there will be losses, but stick to the game plan. As
always, controlling risk is of paramount importance! Above all, do not trade with
money that is not truly risk capital. This means that if you lost it, it would not
change your life!

Places To Get a Great Forex Trading System

’s very important that if you’re exploring forex trading or already trading that you have a trading system. One aspect of that trading system are the actual setup rules which usually contain entry and exit techniques. Traders put a lot of time and effort in developing these setup rules too often neglecting other aspects such as position sizing or relative size of your profits compared to losses. Therefore it’s important to find a comprehensive forex trading system.

Where can you find a comprehensive forex trading system? Throughout the last three years, I’ve been through many trading systems obtained mostly from books, forums, or other websites. I’ve found that almost every time, I’ll mold that system into something totally different than the original incarnation, something that fits my personality and style of trading. Many times, the original system will also need to be expanded to include things that were neglected or forgotten. Those of you searching for the perfect system may find this method of modifying existing forex trading systems desirable. There are places where you can find the whole package without any need for modification.

This brings me to the question, "where did you get your forex trading system?" I think there are four main ways of getting a trading system.

1. Buy it. There are tons for sale out there on the net but heed caution. Many were just copied from forums, books, or other websites. Sometimes when you buy forex education, part of the package will include a trading system. For instance, Rob Booker provides his Arizona rules as part of his mentoring program.
2. Get a free one. There are many free systems that can be found in books, forums, or other websites. I guess one can question whether a system found is a book is free since you paid for the book.
3. Create an original system yourself. My main trading system is an original creation. There may be other systems out there that are similar to it since it’s a culmination of years of exposure to other systems and experiences.
4. Modify someone else’s system and make it your own. As I stated above, I have done this many times.