Excerpt from: Understanding Spread Betting
|
 |
| November 16, 2006 | | There are some things to be wary of when placing financial spread bets | There are plenty of advantages associated with financial spread betting. However, it is important to note that any sort of spread betting or any investment trading for that matter, carries with it certain risks. And there are disadvantage to every form of trading. Here are some of the disadvantage associated with financial spread betting that you should know about before you begin:
Large losses in volatile markets: Because most financial markets are volatile, you can incur great losses if you spread bet wrong. Placing stop loss orders and limited risk orders can help you prevent too large of losses.
No investor rights: You do not actually own anything when you spread bet, so it is important to remember that you cannot vote for policy change in a market. Also, there is no benefit from dividends. Really, all you can do is watch to see which way the subject moves, and hope it is in the direction you predicted.
Long-term spread betting contracts can be costly: While long-term spread betting is possible, spread betting in general is less suited to the long-term investor. If you keep a financial spread bet open for a long period of time, you might find that buying the asset might have been more profitable.
| | |
|
|
