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Financial trading has been opened up to many people lately. Its cheap, simple and very fast to access markets and trade. However, some do class financial trading as gambling or claim that its too risky. More than any other investment, of course, financial spread betting can be classed as such, however, you can look at it in a different light, and it has a tax free status. If you’re into spread betting, below are some tips for you:
Dealing in and out small, spread betting is for those who prefer a short term investment. The statistics show that 90% of spread betters place daily bets. However, there is no restriction to daily trading. For someone looking to hold their position for a few weeks or even months, looking into quarterly bets could be a good option for you. This way, you’ll have a wider spread but no financing chart. However, if your trade just runs overnight, you will be rolled over and face a daily financing charge.
However, there is a saying from David Jones that who ever holds their position for the longest, tends to make the most profit. However, I wouldn’t sit on an open position for a long term, that isn’t what I am saying.
No matter what insurance companies you browse through, insurance will always cost you money. It just so turns out, that hedging is about insurance. This is how betting may be used in order to hedge a position.
If you own shares in a company and aren’t sure whether to stay in for a long term. However, you aren’t to sure about short tem either as you feel the shares are about to decrease in value. You could hedge your position; take out a short spread-bet on that company. This is instead of selling your shares and buying them back at a later point. Then, it’s a win - win situation for you.
The reason being, your spread bet will then make up for what you have lost on your shares, if they do go down. On the other hand, if you made the wrong decision and the value of your shares do rise, you are also in a good position. You wont make any profit whilst your position is hedged, however, you significantly reduced your risk. There are many ways to hedge your portfolio and reducing risks.
Spread betters sometimes feel they are in a battle with their broker. For example, when betting at the bookies, its against you and the bookmaker. Only one of you will win. Its slightly different with a spread betting broker.
The reason being, once you have placed your spread bet, the broker will then go on to the real market and match your position in stocks and shares or currency, whatever you are trading. They have therefore hedged themselves and aren’t in your position taking the risk. However, they will receive profits based on the cost of the spread bet and the financial charges.
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