Financial Spread Betting and Trading Leverage 

by Jordan Chapman Sunday, May 15, 2011
<p><i>Leverage - Learn How to Magnify Your Returns and The Main Advantage in Spread Trading through Financial Spread Betting</i></p>

<p> spokesperson mentions in a recent discussion, "So many investors are opting to trade within the financial spread betting market as it provides far better returns than other trading products, however, often they find it difficult to understand and learn." Spread betting allows an investor to trade with much less capital as compared to that of trading stocks. He continues by stating that, "The two main advantages in which spread betting provides is the ability to make profits in markets going down as well as can also make profits by the use of additional market exposure in you limited capital." This is known as spread trading leverage which allows an investor to make the most bang for their buck.</p><p>
<p>Leverage, sometimes also known as gearing, is the idea that allows you to make big profits with your relatively small or pocket sized outlays. It involves utilization of borrowed money to magnify ones returns. Leverage is basically built into the concept of financial spread betting and therefore, is a component of leverage spread trading. It helps to increase an investor's earnings on a given position, thereby increasing his returns manifold.</p>
<p>Asked to provide a practical example, the spokesman replies with the following, "Let us say that the investor wants to get a market exposure of a 10,000 pounds investment, the broker might require him to put up a small amount of 1000 pounds as in initial margin on the bet." He continues by explaining that financial spread betting companies then lend the 9000 pounds to the investor, of which has to pay interest upon; however, with the current low interest rates it's pretty manageable. With an investment 1/10th of actual, an investor gets market exposure equal to that of actual investment; he can earn the profit of an actual investment. The additional 9,000 pounds never need to be deposited, unless the market goes awfully down, and can be utilized elsewhere; for example, in opening another 9 positions like this and diversifying your trading.</p>
<p>It is imperative to ensure that any investor realize that leverage is a double edged sword. It magnifies your losses and profits equally. In most spread bets put through spread trading leverage, the potential losses are not restricted to the initial/margin deposit. In most spread bets put through spread trading leverage, the potential losses are not restricted to the initial/margin deposit. The spokesman from also states, "Leverage is undoubtedly one of the main advantages of spread betting, but it is also one of the main downsides if you don't effectively manage your exposure to risk. Regardless of your trading experience or ability, keeping a constant eye on the degree to which you are leveraged is of critical importance..." An investor must keep an eye on the percentage of his financial spread betting account and ensure it is risked to an appropriate minimum.</p>

Phone: 0798 881 9825<br/>
Country: United Kingdom</p>

General | Categories: investments
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