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Top 11 Online Money Making Methods

3:

Trading the financial markets

What can I trade and how can I trade the markets?

One of the most common methods for an investor to gain exposure to the financial markets is through buying a share in a company. The investor buys with the expectation that the company will perform well and that this will lead to an appreciation in the share price value. There are many things to keep in mind whilst buying, holding and selling a stock. We discuss all of this in more detail in the share trading section.

Spread betting is a high-octane version of share trading. How high the octane goes depends on how hard you turn the knob - or in financial terms, how much leverage you take on. Another trait of spread betting is that you can bet that the value of a security will fall rather than rise. Spread betting providers usually offer access to many different types of securities; from commodities and house prices to macroeconomic indicators. Visit the spread betting section for more guidance on this area.

Spread betting is usually seen as a very short term form of trading. For those who have a longer term view on the movement of a security and still want the high leverage associated with spread betting, Options of CFD trading could be for you.

Finally, the last form of trading we discuss is a security in itself which due to it many appealing characteristics we believe deserved its own separate section. That security is none other than the foreign exchange market (FX Trading)!

FX Trading is betting that a currency will fall or rise in relation to another currency. FX Trading has a number of attractive traits, for example you can trade 24 hours a day, 5 days a week. It is an enormously liquid market allowing most currencies to be traded easily. It is also a relatively volatile market which throws up opportunities for the savvy trader to make gains in a rising or falling market. Interested? See the FX Trading section for more information

What's the best way to trade the markets?

There is no simple answer to this as the ‘best’ product to use when trading will depend on the derivative in question, the liquidity and your trading strategy.

The table below gives an ‘at a glance’ snapshot of the main products that are used to trade. This information should be used as a general guide as specification can change depending on a number of factors including the broker that is used, the underlying security and your trading strategy. Click on the relevant column for more information.

Trading Instrument Trading Instrument Shares CFDs Options Spread Betting
Price movement Actual price movement Similar to shares Can be affected by numerous factors and depends on investment strategy employed Can be affected by numerous factors and depends on investment strategy employed
Leverage No, but finance can be sought from external sources Yes Yes Yes
Ability to be traded long or short Short selling is complex and expensive due to additional broker fees Yes Yes Yes
Dividend payment Yes Yes No No
Expiry Date No No Yes Yes
Stop Loss orders Yes Yes No Yes
Spread Actual Price Similar to shares Generally wider than the underlying instrument Generally wider than the underlying instrument
Liquidity Most markets are very liquid Very liquid and is traded on most markets across the globe. Limited to markets with high liquidity so are less easily traded in some markets e.g. emerging markets Limited to markets with high liquidity so are less easily traded in some markets e.g. emerging markets
Risk (1= low, 3 =high) 1 2 2 3
General length of transaction Months to 10+ years Weeks to months Weeks to months Very short-term, seconds to weeks
Voting rights Yes No No No

Recommended Trading Resource: Alpha Forecast

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