CFD Trading and Spread Betting: FTSE perks up, but struggles to find momentum
Giles Watts, Head of Equities at spread betting provider City Index (http://www.cityindex.co.uk/), takes a look at the financial activity shaping the markets on 15th April 2011. Headlines include investors remaining cautious as equity markets traded marginally better and hedge fund manager Man Group posting 3 percent gains. Investors remained cautious in early trading as equity markets traded marginally better. Strength in retailers and real estate helped keep the FTSE in the blue, whilst miners and banks weighed on the index. By mid-morning the FTSE was trading 12 points better at 5975, but was struggling to find momentum. Top of the leader-board was hedge fund manager Man Group; posting 3% gains after Merrill Lynch moved them onto their Europe One List. Real Estate giant British Land posted 2.5% gains as the sector was lifted by a positive note from JPMorgan. Investors were also buyers of retailers, as John Lewis's Waitrose reported strong weekly sales numbers. Solid updates from a bell weather of the high street proved enough to drive listed retailers better, Next and M&S both featured on the winners list. Trader optimism didn't extend however to the heavyweight Banks and Miners, crucially weighing on any FTSE advance. Banks continue to come under pressure as sovereign debt issues remain, particular in the light of Moody's recent downgrade in Ireland. Barclays and RBS all traded to new monthly lows. The mining sector conspired to taint the FTSE as strong first-quarter GDP growth and high inflation from China continue to fuel concern that further fiscal tightening will be required. Traders remain nervous as US reporting season takes hold, signs of improving profit are encouraging, but with stuttering growth a likely prospect, it remains likely that Investors will take a cautious approach to investment as we head towards Easter. Start spread betting with City Index at http://www.cityindex.co.uk/spread-betting/ Spread betting and CFDs are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks. About City Index: Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform. As a group, we transact in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting. We constantly look to widen the range of assets we offer, improve the performance of our platforms and expand the range of services we provide. The result is that our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer service and support. Visit http://www.cityindex.co.uk/ for more information.
CFD Trading Plus Equity Trading
Trading equities over the years has become much easier thanks to the introduction of online trading platforms and other trading instruments. Earlier, you could trade equities only by talking with your broker over phone or you had to be physically present in the stock exchange. Many trading instruments like CFD trading or contracts for difference, futures trading, financial spread betting and so on were not fully evolved and also you had to rest content with just playing the cash market.
The CFD trading instrument nevertheless has revolutionized trading volumes in many markets. We are aware that CFDs basically mean an agreement that enables you to take advantage of the difference within the price you took a situation and the exit price of whichever underlying you traded in. The main advantage is the access CFD trading provides to some larger quantity of shares just by paying a portion or margin money. If you had to trade exactly the same quantity of shares within the cash market, you would have to fork out the full sum which may not be possible for everybody to handle.
CFD trading is different from trading equities in the sense that though the CFD is linked straight to the movement of the underlying instrument, because you are not physically taking delivery or selling physical stock from the underlying like you would in actual cash transactions, the transaction would certainly follow the movement of the underlying instrument. That explains why you only have to part with a margin that is only about 10 - 15% of the actual price of the quantity of shares you're actually trading. This allows you to trade as much as 15-20 times your capital and when the movement of the market or stock is as per your position, then you can make handsome profits about the margin. You can also lose the same way and CFD trading thus remains a two pronged sword.
CFDs unlike options or futures don't expire or have a date wherein the contract needs to be renewed. In fact a CFD contract gets renewed daily if you choose to carry forward your position and you can do that only if you've enough margins inside your cfd trading account. Your bank account will either get debited or credited depending on the way the marketplace has moved for your day as related to the position taken by you.
The benefit with cfd trading is you can go long as well as short. This enables you to make money from the rise and the decline from the market movements.