A Guest Post today –
When you think of financial market trending, your mind is almost always invariably drawn to live shares and corporeal assets. From company stocks to commodities such as oil, these physical entities once dominated the market and served as the staple of any successful trading portfolio.
The market has changed considerably over time, however, with diversification having created a host of innovative product derivatives and new methods of training on the financial markets. Take spread betting, for example, which is now a particularly popular trading method and one that has empowered novice investors across the globe.
What is Spread Betting? A Brief Guide
If you are new to the concept of spread betting, it is a derivative trading vehicle that does not deal with live shares. It also does not require traders to own an underlying asset or commodity, affording them flexibility in terms of how and when they are able to generate a profit. Instead, it enables investors to take a position against the value of an underlying financial instrument (and back it to either rise or decline in the prevailing market). This is similar to the concept of standard betting, where customers back one of two potential outcomes relating to a specific asset class.
This is therefore a speculative trading vehicle, and one that offers a clear, competitive advantage to spread-betters. After all, it is possible for traders to profit in a depreciating market through spread betting, as investments do not always require the price of the underlying asset to rise if they are to be successful. If you speculate that the price of a stock or asset will fall, for example, you can make money as the market declines and burden of ownership begins to take its toll on traders.
Interestingly, this method of trading is not restricted to stocks in the modern age, with online brokerage platforms such as ETX Capital offering access to diverse asset classes such as indices, currencies, gold and oil.
The Last Word
In terms of popular application, spread betting as become a preferred trading vehicle in markets such as the foreign exchange. After all, volatile markets of this type are notoriously complex, while only traders with an appetite for risk and a keen sense of determinism are able to prosper. Spread betting simplifies the complexities of this market and minimizes the risk of forex trading, however, so long as you approach the market with some understanding and an ability to analyze real-time trends.
Note: This type of trading is not yet approved in the US, but I have a worldwide audience, many of whom are interested in CFD (contract for difference) and spread betting.