Can it be tapped into $5.3 trillion forex market and cash in?
More than 95 % of the currency trades are basically based on pure speculation. It is not really something to consider unless one is ready to take on the stock market, but can be productive if studied well. This is best exemplified with the advent of foreign exchange platforms which allow individuals to put up trade currencies were able to enjoy burgeoning business in the past years.
Why choose spread betting?
Spread betting primarily about making money from the difference or the spread between the beginning value of a currency and its finished value, which allows traders to profit from a fall or a rise in price.
In spread betting, currency traders normally would borrow more than their initial investment supported by currency trading platforms in an effort to maximise profits. Moreover, market swings emanating from an unexpected direction can not only result to a loss in their deposit but also face a margin call, which sometimes almost immediately for more losses sustained.
The decision by the Swiss National Bank (SNB) to impede pegging the franc to the euro caught a lot of currency traders by surprise, which resulted to unnecessary expenses for a lot of people.
Traders who are completely new to trading must ideally not start with Forex but instead start with stocks. Getting used to managing risks with lesser volatile asset class is something they won’t be able to absorb in a day much less in an hour.
Trading surplus or unlocked pension capital on the currency market is not a normal occurrence, which practitioners admit people in their 50s are less likely to take risks.
How to better learn more about currency trading?
Firms such as CapitalSpreads can assist traders with webinars and educational programmes in which an CapitalSpreads team member will take them through a day’s trading through economic data from bonds to retail sales in order to determine what is better suited for their needs.
Many of the prominent U.K. companies on the U.K. stock market will have operations overseas and currency movements can heavily impact their investment positively or negatively. With high street banks charging minimal rates for buying and holding a lump sum in a foreign currency, specialists can provide with better rates although they need the traders to do their part and study since size is often a good indication of value.
Spread betting fees
The fees on spread betting are typically dependent to how long the bet is maintained open. The buy rate is higher than the sell rates so the broker makes a profit and then there is a fee for financing which also is dependent on the duration of the transaction.
Some brokers and spread betting services usually provide ‘play money’ option in the form of a demonstration account. With others, a full account would required to be opened first although there is the added option to trade on paper. Furthermore, free guides and other online tutorials are also readily available.
As ever, the fundamental idea is to have a better understanding on the nature of the endeavour. This is trading, not investing. It is not enough to know what is right all the time but more importantly when to sell at a loss at a right time.
Why foreign exchange trading is renowned
Investing in a currency is another way to help diversify one’s portfolio. The correlation between currency and other asset classes such as equities is low. Depending on how one access the Forex market, it will depend on what it is needed for. A currency or payment specialist is very helpful where there is a specific, non-speculative purpose such as the purchase of properties abroad.
They can likewise be used as a frugal option if they want to take a longer-term view on the currency market. For instance, purchasing and holding foreign currencies in a bank account, the same are speculative trading services such as spread betting or Contracts for Differences that can greatly assist traders in their endeavours.
Being aware of the risks of forex trading
Spread betting and CFDs brought about some of the financial world’s largest blow-ups and is the reason behind Forex specialist websites coming up with warnings of potential losses that exceed their initial deposits.
Before any contract can be validly entered into the client, they need to be fully aware of the risks associated with the position they are taking in the Forex market. Historically in the United Kingdom, it’s been really uptight to market Forex trading services due to the high risks which can be involved and were previously available to more hands on investors. Furthermore it must be noted that all Forex platforms provide speculative trading, ideally through a brokered CFD or a DIY spread betting service.
Latest posts by Alex Johnson (see all)
- FTSE up as BoE stalled rates, QE while financials soar - March 13, 2015
- Royal Mail Shares: RMG approximates cut at Berenberg - March 3, 2015
- Currency trading when in your 50s - February 13, 2015