(The following is a guest post)
With the UK now officially back in recession, opportunities to make money are once again becoming scarce, or so it would seem. For conventional traders, the chance to make money from trading stocks and shares is diminishing, but through companies such as spread betting provider Finspreads, it’s possible to make money from trading even in volatile markets through spread betting.
Spread betting is a form of trading where people trade on whether the value of an individual stock, market or commodity rises or falls in value, and more traders are beginning to see it as a viable and potentially more profitable form of trading. With companies such as City index, traders can pick from thousands of different markets and trade on one which they like.
If you’re intrigued by spread betting and how to make money from a volatile market, you’re not alone. Before you find yourself in a position to be able to make money from volatile markets, there are a few basics you should be aware of before you begin to trade with a degree of confidence.
The first thing to do is identify a market you know about. If you know it inside out, choose that one, as it could greatly improve your chances of making a profit from your trading. Secondly, you should monitor any short, medium and long-term movements in that market. Keeping up to date with trends is vital if you’re to work out which way you think the market will go.
Monitoring news stories relating to that market is also important. Again, this will help you to reach a decision on whether you’ll go long or short on that market. After that, work out how much you want to trade.
By spread betting on a volatile market, you could make money on the value of that market increasing or decreasing by trading on the possible outcome. So if you anticipate that a market will rise, you go long or buy that market, and if you believe it will fall, then you go short or sell. If you were right and the market moves in the direction you had anticipated, you make a profit; otherwise you would make a loss. Spread betting on entire sectors is usually a good place to start, as it’s seen as easier than doing so on an individual stock. Being a leveraged product, even on a small deposit of around £300 or so, you could make profits totalling thousands if your trade is the right one. Remember, however, that you could just as easily lose the same amount of money if the trade goes against you.