Financial spread betting or often times referred to as margined trading has gained extreme popularity mainly due to the ease of trading it as well as the fact that you do not have to pay any tax on profits gained through this trading. By the look of it, this instrument appears to be dreams come true trading instrument for everybody and more and more people should be ideally taking to it. But that does not seem to be happening as many people still prefer to trade in the physical market or even in the futures as well as CFD market.
So where is the catch and are there any issues or risks attached to spread betting? Moreover, what should a trader watch out for when he gets into margined trading? This form of trading appears rosy and too good to be true and that is always a dangerous sign. Such instruments are far riskier than conventional share or stock trading and you can end up losing a great deal of money very quickly due to no protection at all.
Moreover, any losses you make will have to be paid out by you and you will not be able to offset it against capital gains that you may have made on your other investments. Now what are the mistakes that a spread betting trader invariably makes that leads to tremendous losses? For one, you tend to become over-confident once you make money quickly on a bet. This emboldens you to place more aggressive bets and you end up losing everything and more. Due to the leverage effect, you can lose money just as quickly as you can make it.
Hence adequate spread betting training is necessary to avoid this scenario. The second aspect or mistake that spread betting traders forget before getting into this trading activity is the capital they are required to have in order to keep their positions alive and in play.
If that is not possible, then they would have to get out of trades quickly with losses and will not be able to catch the upswing of the market or average out positions. Lastly, spread betting traders have to enter the markets at the right time and only if the market is volatile, can they make money. So timing of the entry into the spread betting trade and adequate reading of the market is necessary to be successful on a consistent basis in spread betting.
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