Step-By-Step Guide to Spread Betting Shares for New Traders
LONDON, February 27, 2012 /PRNewswire/ –
Spread betting [http://www.cityindex.co.uk/spread-betting ] on the price movements of
thousands of shares worldwide can be risky, but it’s simple to learn how with our
step-by-step guide for new traders.
With a low margin feature, you’ll be able to trade on the price movement of a range of
shares [http://www.cityindex.co.uk/spread-betting/spread-bet-markets.aspx ] without owning
the underlying asset.
Through this guide, you will receive a brief overview of spread betting, what it means
to go long and go short on shares and the trading education resources
[http://www.cityindex.co.uk/spread-betting/education-and-resources.aspx ] available to you
as a new trader to help build your confidence and practice spread betting with zero risk.
Step 1: A Spread Betting Overview
Spread betting is a popular product for traders both new and experienced because it
offers an easy entry level into the financial market due to its low margin feature and
high leverage. Spread betting is also tax efficient, as currently under UK tax laws all
profits made are free from UK Capital Gains tax* and Stamp Duty*, though this remains
subject to change.
Allowing traders to go both long and short on trades – spread bettors can profit from
a market which falls as well as rises.
The aforementioned high leverage allows traders to deposit a small percentage of the
total value that they wish to trade; increasing exposure which could potentially magnify
profits.
However, should the market move against their position, a leveraged product such as
spread betting, can also result in losses greater than the initial deposit making risk
management
[http://www.cityindex.co.uk/spread-betting/how-to-manage-risk.aspxhttp:/www.cityindex.co.uk/spread-betting/how-to-manage-risk.aspx ]
imperative to a trading plan.
Step 2: Going Long on Shares
As an example, say you predict that M&S shares will rise and you ‘go long’, buying at
GBP10 per point at the buy price of 351p.
If you are correct, and the share price rises to 400p you may decide to take your
profits and close you trade. As a result, you would net a tax-free* profit of GBP490.
If however, you predicted wrong and M&S shares declined to 302p, you would net a
GBP490 loss.
Step 3: Going Short on Shares
Using the same example above, say you predicted that the M&S shares would fall, and
you ‘go short’ and ‘sell’ at GBP10 per point, at the sell price of 349p.
Over the coming days, your predictions prove correct and the share price falls; when
they reach 300p, you decide to cash in your profits, closing you trade by buying back at
GBP10 per point at 300p.
By selling at 349p and buying back at 300p – with a GBP10 per point stake size – you
net a tax-free* profit of GBP490.
Had you predicted wrong and the M&S shares had rose to 398p, you would have net a loss
of GBP490.
Step 4: Trading Education & Resources
Innovative and accessible online trading tools
[http://www.cityindex.co.uk/trading-platform/online-trading-platform.aspx ] and real-time
financial news and trends have opened up opportunities to speculate on share movements.
The trading platform from City Index offers extensive trading education and resources
to help you make better-informed spread betting decisions.
In addition, free trading webinars
[http://www.cityindex.co.uk/learn-to-trade/webinars.aspx ], held by a team of spread
betting experts from City Index, enable investors to learn spread betting at their own
pace, from their own computer, no matter where they are.
Summary
Whilst spread betting
[http://www.cityindex.co.uk/spread-betting/start-spread-betting.aspx ] can be risky, the
step-by-step guide aims to help new traders prepare before making their first trade. It is
important to remember that as a leveraged product, you can incur losses greater than your
initial deposit. Ensure you fully understand the risks.
*Spread betting is exempt from UK stamp duty. Spread betting is also exempt from UK
Capital Gains Tax. However, tax laws are subject to change and depend on individual
circumstances. Please seek independent advice if necessary.
About City Index:
Today more and more individual traders are discovering the benefits of derivatives,
and many of them are discovering them through a City Index trading platform.
As a group, we transact in excess of 1.5 million trades every month in over 50
countries. We provide access to a wide range of instruments including margined foreign
exchange, CFDs and, in the UK, financial spread betting
[http://www.cityindex.co.uk/spread-betting ].
We constantly look to improve the performance of our platforms and expand our range of
services. The result is our customers benefit from innovative trading tools with
transparent pricing, competitive spreads, and a high standard of customer support. Visit
http://www.cityindex.co.uk for details.
SOURCE City Index
