Exchange Traded Funds and Financial Spread Betting

Exchange Traded Funds and Financial Spread Betting

Combining Financial Spread Betting with ETFs can give you a way to get exposure to an ever growing range of sectors, commodities, global financial indices which you can profit from regardless of markets moving up or down. An as an added bonus UK taxpayers can make tax free gains.

www.winonmarkets.net

Exchange traded funds, or ETFs, have been around since 1993. ETFs are index tracking funds which can be traded on a stock exchange, just like a share.
A typical ETF might seek to mirror the performance of an index like the S&P 500 or the FTSE 100, or perhaps a single sector such as the S&P Energy Sector (XLE) or commodity price such as Gold (GLD).

ETFs have been growing in popularity with investors both large and small, partly because they can be easily traded, just like any other listed security, and partly because they are much cheaper in terms of the fees they charge compared with conventional mutual funds or unit trusts.

So why would you place a financial spread bet on a ETFs? Surely, if you are convinced of the merits of ETFs, it would be easy just to buy and sell the physical ETF rather than opening a spread betting or contracts for difference (CFD) account to trade them?

ETFs are offered as spread bets for a number of reasons, many of which really boil down to the advantages of financial spread betting. For starters, when opening a spread betting account, you gain the advantage of trading on margin: your spread betting company will loan you the majority of the value of the trade, while you only need to deposit a relatively small percentage as your margin. This is something you could not do with a physical trade on an ETF. It also means you are effectively trading a larger amount of shares in that ETF than you would ordinarily be able to do, and if you are right, and the ETF’s price goes up, you get to keep all the profit from the trade. Of course, if you are wrong, the losses could be proportionately great, so caution should be used when trading these products.

ETFs are easily available via a conventional stock broking or share dealing account. But like trading physical shares, if you trade physical ETFs, you are liable to a commission fee every time you trade. In addition, you may also have to pay custody fees. With financial spread betting or CFD trading, you don’t face the drag these costs can pose to your trading account. Plus, you are able to trade other assets, like currencies or commodities, using the same account – not something that is usually possible with a share dealing account.

Financial spread betting also lets you short an ETF. This means you can potentially profit if the price of that ETF falls, by using the bid or sell price. This is much harder to do in the physical market. Yes, some providers do list inverse ETFs, that is, funds which move in the opposite direction to the index. But these are generally only available for the more high profile indexes, like the S&P 500 for example. It is much easier to short an ETF using a financial spread betting or CFD account.
Finally, you may own the physical ETF and may want to hedge your risk by buying a bit of insurance against the possibility that ETF may fall in value. You can do this using a spread betting account by opening a short trade. You must make sure you have a stop loss in place (an automatic order that will close the trade at a pre-arranged price if it moves against you), because otherwise your hedge order will eat into any profits you are making in the physical market. This can be a good tool to protect yourself against sudden market moves.

The universe of ETFs is expanding all the time as they increase in popularity. There is already a significant number of ETFs available for spread betting. These include many of the major commodities markets, where there are ETFs tracking the likes of gold, crude oil, cotton, corn, natural gas and sugar. ETFs tracking a basket of commodities (also known as Exchange Traded Commodities), like agricultural commodities or base metals, are also available to trade.

ETFs are a good way to access sector-specific indexes, for example covering financial services, utilities, real estate or oil services. They can also be used to trade some emerging markets stock markets, like Brazil, China, Russia, or even Taiwan.
ETFs are able to replicate an index through a variety of means. They are not always suitable for holding in a portfolio over the long term horizon. This is because they are subject to something called tracking error, where the very activity of buying and selling shares or derivatives to replicate the index the ETF is trying to track, as well as charging fees, means the ETF does start to deviate from the index over time. Tracking error will vary from ETF to ETF, and from market to market. This is more of a problem for those using ETFs to hold as part of a long term investment strategy, but they are ideal for financial spread betting, particularly if you measure the life of a trade in days or weeks.
Remember, with financial spread betting and CFD accounts, you do not own the ETF: you are simply seeking to profit from changes in the price of that ETF.
To learn more about Financial Spread Betting and Vince Stanzione please go to www.fintrader.net

Spread Betting on Sugar

Whilst many tend to stick to financial spread betting on shares and indices such as the FTSE100 or Dow Jones multi millionaire trader and coach Vince Stanzione thinks there are plenty of great opportunities in commodities such as Sugar, Cotton and Coffee.

Sugar has offered some very profitable trades both on the up and down side and continues to make large moves.  To learn how to trade and profit from global financial markets then go to www.winonmarkets.net

Vince Stanzione Financial Spread Betting on Sugar

Sugar Prices offer great opportunities to profit from up and down moves

Making Money with Commodities

You don’t have to be a multi millionaire like Jim Rogers or Vince Stanzione to make money from the commodities boom. You can now start trading and investing in commodities with as little as £1000 ($1500), Whilst Currency trading and FX seems flavour of the month most smaller investors have stayed away from commodities which is a big mistake. To learn more go to www.winonmarkets.net

Here are the best performing commodities so far this year.

Commodities Vince Stanzione Financial Spread Betting

Will Gold, Dollar Trades Backfire?

Widespread expectations of more Fed asset buying has drawn excessive bets on gold and against the U.S. dollar, making these trades vulnerable to near-term setbacks, reports Barron’s Michael Santoli. With Financial Spread Betting you can back Gold and teh US Dollar Index to go up or down. To learn more go to www.winonmarkets.net

Speculative Investor: Spread betting lets you take a gamble on the price of gold, sugar, cotton and even pork bellies

Trading Global Financial Markets Vince Stanzione

Financial Spread Betting has attracted growing numbers of people because it is fast and furious — and free from stamp duty and dealing commissions. Profits are also exempt from capital-gains tax.

It is ideal for short-term speculators looking for opportunities to profit from a range of volatile markets. The ability to “sell short” also means that people can make money when markets are falling. It is this feature that has attracted many disillusioned equities investors.

Spread betting involves speculating on the daily or future price movements of shares, commodities, currencies and indexes, and their associated futures and options. The spread-betting company quotes a buying and selling price for each financial instrument. The difference between the two prices is the spread, typically 0.2% of the underlying asset.

For every point (or penny in the case of share prices) that you are right or wrong in your prediction you win or lose a multiple of your original stake.

For example, if you thought the FTSE 100 index still has further to rise, you could either bet on the daily movement of the index or take a longer-term view and bet on its likely position in a few weeks or months.

Spread betting is a useful way to invest in gold and other precious metals because you can benefit from price rises without having to take ownership of the underlying assets.

The recent hike in the gold price, global economic worries, a falling dollar, and struggling equity markets, has been a godsend for spread betters.

On August 6, IG Index was quoting a spread of $1208.3/ $1209.3 for the price of gold per ounce. If you had placed a buy bet in the expectation that the gold price would rise and had staked £100 a point (in this case, one point equals a 1 dollar movement in the price), you would have made a £14,100 profit if you had closed your position after two months. Then, IG Index revised quote was standing at $1359.0/$1360.5.

So sold at 1359.0 bought at 1209.3 = 149.7 X £100 = £14,970 profit

Note whilst Gold is priced in US$ a spread bet can be made in pounds, Euros or US$

Spread-betting companies will often allow bets of up to £10000 a point providing you have enough cash in your account to cover potential losses. Unlike with fixed-odds betting, spread-betting losses can be rapid and unlimited, making it a higer-risk business.

In an effort to minimise the risks and attract more mainstream investors, spread-betting companies have introduced guaranteed stop-loss systems that automatically close client positions if losses reach a certain level. Investors pay a premium for this service in the form of a wider spread.

If you make a controlled-risk bet with IG Index they will close the position after the market has moved against you by your chosen stop loss limit for example 24 points. So if you make a £2-a-point bet, all you need to have in your account to cover potential losses is £48. Apart from the obvious cost benefits, spread betting offers several advantages over conventional share trading.

First, you can bet on all manner of instruments from within the same account. Second, you can open an account with very little money because you don’t ever physically own any of the assets you bet on. Third, you can place your bets 24 hours a day, giving traders the ability to react to American index movements and company-related announcements after the British markets have closed. Just remember, it’s a risky business and you should only use risk capital also it’s worth getting some good tuition before you dive in.

One of the best know courses on the subject is written by veteran trader Vince Stanzione which comes with a 160 page workbook and 2 hours of DVD material where he shows you the ins and outs of successful spread betting. The course also gives you access to a virtual account so you can try his methods without risking real money. The course costs £347 and is available from www.fintrader.net

Introduction to Spread Betting and Betting on Gold

Introduction to Spread Betting and Betting on Gold

Financial Spread betting also know as Financial Spread Trading has seen massive growth over the last decade in the UK and is a flexible and tax-efficient way to back anything from shares, currencies, commodities, Bonds, stock indices and even house prices.

Financial spread betting lets you gain exposure to the performance of key markets, without having to put up the full value of the transaction as you’re trading on margin.

So you can profit from market moves while only putting forward a margin deposit as collateral, this can be as low as 10% of the contract value.

 As your transaction is a bet, your profits are free from UK capital gains tax and income tax, and trades on individual shares are free from stamp duty. Those outside the UK may also be able to Spread Bet however the same tax advantages do not apply.

One of the major advantages of financial spread betting over conventional share trading is that it is just as easy to go short as it is to go long. That is, you can profit even when a particular market is falling, you simply open a SELL/DOWN bet rather than a BUY/UP bet. Other methods of shorting shares are often expensive and not easily available to smaller private traders.

Financial Spread betting can be used to trade from less than one minute up to 12 months and can be used to cover a range of different investment strategies. For instance, you could use spread bets to hedge the value of your existing holdings, Hedge against a currency exchange movement or to speculate on market volatility. You also have the flexibility to respond quickly to any changes in market conditions as most Financial Spread Betting companies are open 24 hours a day.

 As the popularity of Financial Spread Betting has grown so have the number of Financial Spread Betting Brokers, as traders this is good news as the competition has lead to better products, lower spreads and smaller bet sizes.

 Another advantage is the ability to trade in your base currency for instance sterling, even though the market may be traded in US Dollar for example Gold or Oil, this means you don’t have to worry about exchange rates.

Example of a Financial Spread Bet Gold

 Let’s look at placing a trade on Gold. We can trade via phone, Internet and many cases now we can trade with a mobile phone such as an Iphone.

All spread bets have an expiry date; we don’t have to hold the bet until this date.

 In this case April Gold which is currently quotes at 945.0/946.0 The first price is the price we sell at the second is the price we buy at.  We think Gold will go up so we buy £100 per point at 946.0.

 One important factor in trading is to always protect your downside; however sure you are you need to have a safety net, in this case a Guaranteed Stop loss.  We will place our stop 20 points away, so if Gold hits $926 then the bet will be automatically closed out. This means that our downside is know ahead of time, our profit is unlimited but our risk is strictly limited to 20 X £100 so £2,000.

 A few weeks in to the trade we see Gold is now trading at 1075/1076, we decide to take our profits and close the bet, so we now sell at 1075.

So to recap Bought £100 at 946.0 sold £100 at 1075 the difference is 129 points X £100 will £12,900 profit.

We could have easily done the reverse and profited from a down move. Also notice whilst Gold is traded in US$ we are using £ as our betting currency.

To Summaries

Financial Spread Betting can be used to profit from Rising or falling markets. It’s possible to trade a diverse range of markets form one account. Bet sizes can be smaller than traditional futures brokers. Traders can use guaranteed stop loses to protect against unlimited losses, yet profits can be unlimited. It is still important to realize that Spread Betting is a higher risk investment and it is advisable to learn and practice before placing real trades, also only trade with risk capital.

Vince Stanzione has produced a home study course to teach private investors how to benefit from trading financial Spread Bets and Fixed Odds priced at £347. For more information please visit www.fintrader.net

Spread Betting Currencies & Commodities

Here are the best performing currency and commodities markets so far in 2010. To learn more about Spread Betting these markets go to www.winonmarkets.net

Vince Stanzione Currencies and Commodities

click on graph to see full size

What Losing Traders Do – Multi Millionaire Trader Gives You Some Priceless Pointers

I have been trading futures, options and equities for around 24 years. As well as trading my own money I have traded money for banks and I have been a broker for private clients. Over the years I have been fascinated to discover the difference between winners and losers in this business.

Try to learn from the points I am about to give you.

1. Many traders trade without a plan. They do not define specific risk and profit objectives before trading. Even if they establish a plan, they “second guess” it and don’t stick to it, particularly if the trade is a loss. Consequently, they over trade and use their equity to the limit (are undercapitalised), which puts them in a squeeze and forces them to liquidate positions. Usually, they liquidate the good trades and keep the bad ones.

2. Many traders don’t realise the news they hear and read has, in many cases, already been discounted by the market. Often, new traders jump into a market based on a story in the morning paper; the market many times has already discounted the information.

3. After several profitable trades, many speculators become wild and un-conservative. They base their trades on hunches and long shots, rather than sound fundamental and technical reasoning, or put their money into one deal that “can’t fail.”

4. Traders often try to carry too big a position with too little capital, and trade too frequently for the size of the account.

5. They fail to predefine risk, add to a losing position, and fail to use stops.

6. They frequently have a directional bias; for example, always wanting to be long. A good trader should be happy to trade up or down.

7. Lack of experience in the market causes many traders to become emotionally and/or financially committed to one trade, and unwilling or unable to take a loss. They may be unable to admit they have made a mistake.

8. They over trade. Many new traders after opening a Financial Spread betting account are like a child with a new toy. They want to trade anything and everything. The new internet dealing offered by most bookmakers has made it even worse.

9. Many traders can’t (or don’t) take the small losses. They often stick with a losing trade until it really hurts, then take the loss. This is an undisciplined approach…a trader needs to develop and stick with a system. If you are following charts and a trendline or moving average is broken, you must stick to your rules.

“All through time, people have basically acted and re-acted the same way in the market as a result of: greed, fear, ignorance, and hope. That is why formations and patterns re-occur on a constant basis.”

Jesse Livermore

10. Many traders break a cardinal rule: “Cut losses short. Let profits run.” Emotion makes many traders hold a losing trade too long. Many traders don’t discipline themselves to take small losses and big gains.

The above points have been taking from Making Money From Financial Spread Trading 2010 Edition by Vince Stanzione. To learn more please go to www.fintrader.net

Financial spread betting with currencies

The largest financial market in the world is open around the clock. It has no central exchange. It is also the most competitively priced. Yet only a minority of private investors trade it, despite the fact that in the UK it can be accessed tax free by opening a financial spread betting account. This market is the foreign exchange market, also known as forex or FX.

Most people only trade currencies when they change money on holiday. But currency trading also represents a great alternative market to shares. This is because currencies are traded in pairs’: by using a currency spread bet or CFD (contract for difference), you are backing one currency against the other. Nobody talks about the forex market being up or down, because whenever one currency is losing’, another is winning.

You will usually see a currency trade quoted by your spread betting company as a pair of three-letter codes. Every currency traded in the market has a three letter code. For example, sterling is usually quoted as GBP, while the US dollar appears as USD. If you saw GBP/USD on your spread betting screen, the price next to it would be the number of US dollars that could be bought with one pound. If you then bought’ GBP/USD, you would be expecting to profit from a rise in the pound. If you sold’ it, you would be backing the dollar to strengthen against the pound (the number would go down as less dollars would be needed to buy a pound).

Spread betting and CFD trading also lets you profit from changes in currency prices by using margin: your spread betting company or CFD broker is lending you the bulk of the value of your trade by only requiring you to deposit a portion of it, your margin. This is particularly useful for currency trading, because many currencies only change incrementally against each other on a day-to-day basis.

Take the GBP/USD currency pair again: while the pound might strengthen against the dollar over a period of, say, a month, from 1.507 to 1.543, this is only a 36 point change. If you were trading using a financial spread betting account, at £2 per point for example, you would still only have made around £72. Luckily spread betting companies quote fractional changes to the currency rate, one decimal point further to the right. This means you might see the GBP/USD price move between 1.5442 and 1.5581 in a single day.

Now you have a daily trading range of 139 points, much more attractive from a spread betting point of view. Take that out to a month, and there could be a move of 300 points or more, up or down (depending on which side of the trade you are supporting).

As with other products made available by spread betting companies, currencies have spreads (the difference between the buy and sell price) and varying margin rates. The narrower spreads tend to be with the more liquid currencies, those that are bought and sold in big volumes globally, also known as the currency majors’. These include the US dollar, the world’s de facto reserve currency, as well as the euro, the Japanese yen, and the British pound.

Amongst the other popular currencies are the Canadian dollar and the Australian dollar, which are partly driven by the prices of the natural resources provided by both countries. When these are in demand, their associated currencies tend to go up as other countries are busy buying all that copper and oil. Similarly, they will tend to go down when commodities prices decline.

Beyond the eurozone, some other European currencies can see a lot of trading activity, like the Norwegian krona (another currency affected by the oil price, as Norway is a big oil and gas exporter) and the Swiss franc. The Swiss franc, usually seen as CHF’ on the trading screen, is often used as a safe haven’ currency: traders will buy it against another currency during times of market turbulence, when investors are becoming less comfortable with risk. This is because Switzerland as a country is seen as politically stable and fiscally prudent.

When spread betting on share prices, you are focusing on a company’s balance sheet, its results and the quality of its management. When spread betting currencies, you are focusing on countries’ economies, including how much money governments are borrowing and spending, and what their interest rates are. This is why many traders pay very close attention to statements made by central banks. In most major economies with freely tradable currencies, it is the central bank that sets interest rates. These can have a big influence over currency prices.

But apart from interest rates and borrowing, other factors can play a big part in the health of an economy. When governments announce unemployment and inflation figures, currencies can move suddenly. One of the more interesting currency trades over the last six months has been the euro. While the European Central Bank has kept euro interest rates steady, the near-bankruptcy of the Greek government, and the fears surrounding the economic health of a number of other eurozone economies, have led to heavy selling of the euro. At the same time, efforts by other eurozone countries to build a rescue package have prompted buying of the euro. This has made the euro an interesting currency for traders as it has moved up and down more frequently than it has historically tended to do.

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