In highly volatile markets in which prices move suddenly in an unpredictable manner can be a very intimidating experience even for the most experienced trader. When share prices fall, a lot of traders instinctively pull back their money back and keep in inside their banks.
However, for a trader who have extensive knowledge of spread betting, falling markets and volatility is not an obstacle in profiting from a difficult environment. Even with the most difficult situations, spread betters represent an advantage for opportunity in profits which traditional share trading does not seem to have.
With traditional share dealing, individual traders can only profit when the existing markets are on the rise; there is no effective approach for a private trader to profit from a share price whose price is plummeting.
Spread bets on the on the hand, allows traders to gain from falling markets through a process known as short-selling or going short. Short selling in spread betting is practically the same as purchasing except that traders are targeting for the price to go down instead of going up. Choosing a reputable share index can definitely help you decide the suitable size of a particular bet you wish to put.
The process works basically in all intents and purposes to be similar but the only difference lies in the fact that it is used to open a deal instead of simply purchasing and selling shares. For every point the market goes down, you would be getting your money’s worth and if the market goes up you lose but the interesting and advantage fact is that there are no dealing charges and tax on profits you earn.
Consequently, if you place a bet on a share that is predicted to fall but goes up instead, you practically lose money. It is worth remembering that when going for a short position, although gains are unlimited for a share price since it will never fall below zero, losses are technically unlimited since prices can soar to unlimited heights.
Going short is different from betting if the market will rise (technically going – long) and it is crucial that you employ the use of stop – losses. Because once you place a bet you need to indicate the upper limit for your bet and if the price reaches that limit, the bet will instantly be stopped so that you won’t incur additional losses.
There are two known types of stop – losses available for traders. The non – guaranteed version which is the more popular one comes with an additional charge since it is set to cover a wider scope of stop – losses than usual.
It really doesn’t matter whether which direction you place your positions in spread betting because the advantages clearly outweigh the risks over traditional share trading. Because of its quick and flexible way of trading it can move rapidly in volatile markets which allow traders to share their trading skills to move up and down as the prices variably change.