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Benefits of Spread Trading PDF Print E-mail
Written by Editor   
Wednesday, 16 March 2011 21:11

Why is spread trading one of the fastest growing form of trading? What are the benefits of spread trading? And what can South African retail investors gain from this innovative approach to trading? Here are the key benefits of spread trading:

 

You pay no stamp duty!


How can this be? No duty to pay? Well it is true. Because when you spread trade a share you are taking up a position on that share with your spread trade company who is the market maker. You don't actually have to buy the share. Because you don't take ownership of that share you don't have to pay stamp duty on that transaction. This is one of the biggest benefits spread trading has over traditional stockbroking.

 

No commissions

The spread you accept when you open a trade is your key cost. Spread trading companies also charge an overnight rolling fee based on open trades. These are the two costs you face - no commissions or other charges are levvied. The screen price at which you trade represents the total cost of the transaction. There are no futher commissions or extra charges.

Make money on rising AND falling markets

Imagine only making money off rising markets? These days it can not be guaranteed that markets will keep rising yet we continue to trade shares in the traditional manner and lose money when the market pulls back. Traditionally it was only the institutions and hedge funds that could profit from falling markets. Spread Trading clients can now also benefit from falling markets by 'selling', also known as 'shorting' the market, giving them the opportunity to profit in volatile times

No currency risk on your Rand denominated account

Spread trading is just starting up in South Africa. Unfortunately most forex trading companies and futures trading companies only allow you to operate your account in dollars. This is a bad thing should the rand start to lose ground to the dollar. The value of your account slips away!But, now that spread trading companies are starting to take a serious interest in South Africa they have started offering rand based accounts. No more currency risk!

Your trades are instant

No more phoning your stockbroker. No more sitting around anxiously waiting for your share purchase to be executed in a market struggling for liquidity. Because you are not actually entering the market when you spread trade you get immediate execution of orders, either online or by telephone. Unlike traditional share dealing through a stockbroker there is no delay between placing an order to trade and execution of that order.

Spread betting is an extra weapon in your investment portfolio

Hedging. You can protect a future payment or receipt due against any adverse currency fluctuations. A spread trading account will quote all of the major currency cross rates and can provide any other specific rates on request. You can also hedge the value of stocks held in foreign currencies in the same way.
 

Risk Involved

Spread Betting and CFD trading carry a high level of risk to your capital and you can lose more than your initial deposit. These trading products may not be suitable for all investors so seek independent advice if necessary.

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