| Over the last couple of years we have seen | | | | £120. |
| increased market volatility as the credit crunch and | | | | You are also able to trade the markets in Euros and |
| hesitant recovery have changed the face of the | | | | Dollars. If you want to trade in Dollars then 120 |
| financial landscape. Nowhere has this been more | | | | points x $1 per point = $120. |
| obvious than the Dow Jones Index. | | | | Of course if the market went against you, dropping |
| Many investors have been trading the Dow Jones in | | | | by say 90 points, then with a £1 stake you would |
| an attempt to capitalise on the market swings. If you | | | | lose 90 points x £1 per point = £90. |
| are looking to trade the US markets it is important to | | | | Obviously this would be a fairly poor start. However, |
| fully consider your options. | | | | with firms like paddypowertrader you can add a Stop |
| One thing to bear in mind is that you can get carried | | | | Loss at let's say, 30 points. |
| away when you start investing, particularly when | | | | If you were betting on the Dow Jones this would |
| thinking about the amount of money you might | | | | mean that your bet would be closed if the Dow |
| make. And making a profit is rarely seen as a bad | | | | moved against you by 30 points. Therefore, instead |
| thing. Still, investors have to remember that they | | | | of losing £90, you'd only lose 30 points x £1 per |
| won't profit on every trade. | | | | point = £30. (It should be noted that not all Stop |
| Whether you speculate on stocks or even if you | | | | Losses are guaranteed). |
| invest via newer products, such as ETFs or CFDs, | | | | However, assuming you correctly predicted the |
| there are always risks. | | | | direction of the market, your upside would still be |
| As an investor looking to trade the financial markets | | | | £120 if it moved 120 points or £60 if the Dow |
| you may find a range of trading options available. | | | | Jones moved 60 points. |
| Currency markets? Individual stocks and shares? | | | | There are a wide range of benefits with spread |
| Commodities? Nowadays many investors are turning | | | | betting, it is not all about risk management. |
| to financial spread betting. Spread betting offers a | | | | As a result of the large variety of available markets, |
| convenient trading option for both experienced | | | | spread betting is an investment instrument worth |
| traders and smaller investors. | | | | thinking about. Most spread betting companies offer |
| We have talked about the fact that there are | | | | thousands of international markets which range from |
| potential downsides to investing, you can lose money. | | | | indices, shares and currencies to commodities such as |
| From property investment to share trading, every | | | | Gold, Oil and Copper. |
| form of speculative investment can result in a loss. | | | | Investors are able buy or sell financial instruments. |
| With spread betting, these losses can be greater | | | | This is very useful as it allows you to trade on a |
| than your initial stake size. | | | | given market to move the way that you believe it |
| The following risk warning also provides you with a | | | | will go. Spread betting does not force you to bet on |
| couple of other handy pointers, ‘spread betting | | | | a market to increase, you can speculate on a market |
| does carry a high level of risk. Before trading, please | | | | to fall. |
| ensure that spread betting matches your investment | | | | Financial spread betting is tax free*. There is no |
| objectives. Make sure you familiarise yourself with | | | | actual exchange of any assets; you are just spread |
| the risks. If necessary, seek independent advice'. | | | | betting on the future value of a market. |
| Having said that, you are able to put a limit on the | | | | If you are trading stocks and shares then you |
| size of your position to help reduce your potential | | | | normally face broker's fees and/or commissions. |
| losses without impacting your upside. You can also | | | | When financial spread betting, trades are not subject |
| employ smaller stake sizes such as £1 per point or | | | | to these costs. |
| $1 per point. | | | | You might be thinking, this sounds good but what's |
| If you only want to gain a little exposure then you | | | | the catch? Well, as we have said, there are |
| could trade the popular markets such as the Stock | | | | downsides. Before speculating on the Dow Jones or |
| Market Indices, ie speculate on whether the Dow | | | | any other markets, make sure you have fully |
| Jones, FTSE 100, German 30 or French 40 etc will | | | | considered the risks. Remember that Stop Losses |
| increase or decrease. | | | | and smaller stakes can help lower your risk. |
| If you speculate on the Dow Jones to go up, with a | | | | * Based on current UK tax law. If you pay taxes in |
| £1 per point stake, and it goes up by 120 points | | | | another jurisdiction this may vary. |
| then you would make 120 points x £1 per point = | | | | |