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Financial Spread Trading - Dispelling Your Common Myths
A lot of financial traders are put of by spread betting essentially because it has got the word "Betting" in the title. Some people associate the word betting with bookmaking and any financial trader is just not a gambler. They take calculated risks and this is certainly not bookmaking. Well you know what, sugar coat it just like you want but if you trade the financial markets via shares, CFDs, ETFs, options or any other financial instrument, like it or not you are without a doubt bookmaking. Fine so you may have a strategy that offers you an upper hand over the 50:50 win lose probability that you would have should you just trade at random. But like it or not there is no way that you may predict with 100% accuracy the direction or depth in which a certain market or stock will move. Anyone that claims that they have a 100% guaranteed system is a bare faced liar. There is absolutely no such thing nor can there be one. The holy grail spread betting strategy does not exist fact.
The thing is there is absolutely no reason to be alarmed by the word "betting" in the term financial spread betting. There is not any reason you simply cannot make use of financial spread betting as an element of a well though out investment method. In fact the use of a spread betting account in your good trading system is a very wise move. Spread Betting is at present free of any form of Tax in the UK and therefore you get to keep every penny on the profit you make. The only costs that are involved are those in the slightly greater spread and the cost of rolling charges if you take out a rolling daily bet. It depends on your bet size nevertheless if your keeping it small it's actually cheaper than trading via a regular stock broker. The added spread and rolling costs are how the spread betting companies make the vast majority of their income, but hey they are required to turn a profit or we won't be able to trade with them.
It's also commonly believed that spread betting firms want you to lose as this is part of how they get their profit. While there could be some truth in the belief that sometimes when you lose they make a profit the majority of their revenue is from the spread and rolling costs. I suspect that when you place a trade, a professional trader will take a view with regards to whether to place the trade on the open market as well. If and when they think it's a good trade and there's a probability you will make a profit they may submit the trade on the open market to hedge your position. If they think it has a probability of losing they may take the view to not hedge the trade with the view that they will make money from your loss. Needless to say when the spread betting firm does this they take an associated risk as the position can easily turn a profit and they have to pay you that which you are owed from their own pocket.
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