Calling all traders: One day to go
David Jones is the chief market strategist of IG Index and he will be delivering a masterclass at Active Trader on financial spread betting and contracts for difference.
TRADING COMMENT
DAVID JONES
FOR many years, trading financial markets in general, and spread betting in particular, was felt to be the reserve of City professionals. But with advances in technology and an increased awareness of the impact that financial market gyrations have on our everyday lives, it has increasingly moved into the mainstream.
Even among people who have never tried it, there seems to be a lot of curiosity about financial spread betting, resulting in a wide spread of opinion at both extremes – with some thinking it’s an easy way to make money, and others petrified at the risk a small movement in a market can have on your profit or loss.
While spread betting is not suitable for everybody, it does not necessarily have to be a rollercoaster ride of emotions, glued to the screen 24-hours a day worried about how the latest Chinese trade figures will impact on your long FTSE/short pork bellies trades. There are plenty of tools these days that are available – and should be used – to help manage risk and free your time up to do something more productive than watching numbers change. For example, stop losses have been around for a long time – and with the advent of guaranteed stop losses you can absolutely nail down your maximum risk right from the start of the trade, regardless of what effect outside events may have on your position.
Another important consideration is thinking about the size of your trade. If you find yourself swinging from elation to depression with every one penny move in the price of Marks and Spencer and the effect it is having on your account balance, then it could be the trading gods’ way of telling you that maybe you should scale back the size of the position. Figuring out the direction for a market can be tricky enough at the best of times. Trading at a level that makes sense, based on your risk capital, can help you look at the markets from a balanced viewpoint, and not get caught up in the minute-by-minute swings.
There are plenty of educational resources available from spread betting companies. Many of these videos are aimed at those for whom financial markets are a new thing, or those just starting to get involved. They take you right from the basics – finding a market, placing your very first trade and managing risk – to more advanced topics such as trading volatility, using options. and technical analysis.
If the idea of trading financial markets has ever appealed to you, there is a wealth of information out there and you can dip your toe in at a level that suits your own particular risk profile.
David Jones will be delivering a comprehensive spread betting and contracts for difference masterclass at 3.30pm tomorrow. To meet our panellists and dozens more trading gurus on the day, buy your ticket today: www.cityamactivetrader.com
Even if you are simply looking to hedge your equity portfolio in turbulent times, getting to grips with contracts for difference is essential for the active trader.
TRADING COMMENT
WILL HEDDEN
ADVANCES over the last ten years have served to level the playing field of financial markets for private investors around the world.
It is not surprising that contracts for difference (CFD) have enjoyed such strong growth in popularity over the same period. Previously, they had been almost exclusively the reserve of major financial institutions, but leaps forward in technology have opened them up to a whole new audience.
Another reason for the CFD boom is transparency. The financial industry has to be at the top of the league of industries which love jargon – but the concept behind a CFD is very straightforward. It mimics the movement of an underlying market – so if the price of Amazon shares rises from $125 to $130, the CFD will follow suit. If you would like to take a position using CFDs equivalent to owning, for example, 100 shares in Amazon, then you buy 100 CFDs.
The movements in various markets over recent years have also helped to boost the appeal of CFDs. In many countries around the world it has historically been difficult for clients to “short-sell” markets – particularly individual equities. CFDs can be traded in both directions, so if you had a negative view on the direction of, for example, Citigroup over the next couple of months, or the price of gold over the next few hours, it is easy to position yourself to profit if the market drops.
Added to this is the wide range of markets available. There have always been ways for private investors to trade individual shares, foreign exchange, commodities, bonds, stock indices, etc. But with CFDs this can all be done from one account. And, unlike with the futures markets, the size of the exposure can often be tailored when using CFDs. For example, if our clients want to trade stock indices such as the Dow Jones, or forex pairs such as euro-dollar, there are mini contracts available, allowing the level of risk to be kept to a level that they feel comfortable with.
CFDs really are one of the best ways of trading a wide range of markets if you have a short to medium-term view on direction. While all of this can seem a little daunting to some at first glance, there is a whole host of resources out there to guide you through.
Will Hedden is a sales trader at IG Markets.
A good place to start – or further – your education is to come along to City PM’s Active Trader. Your ticket includes a complimentary lunch and champagne reception. www.cityamactivetrader.com