In the past, trading on the movement and price direction of financial markets was largely the preserve of major banks, high net worth individuals and sophisticated investment houses. However, the advent of online applications like the Internet has now made it possible for retail investors with limited capital to trade worldwide financial markets in exactly the same way these sophisticated investors did in the past. This form of online trading is widely known as Financial Spread Trading/Betting.
What is Financial Spread Trading?
Financial Spread Trading is a highly leveraged form of trading that has become a mainstream investment tool for retail investors around the world. Effectively, it is a mechanism for ordinary individuals with limited capital to gain access to worldwide financial markets. You can actually trade shares, options, indices, currencies, commodities and just about any other financial instrument through an online financial dealer.
Unlike the traditional way of investing the Stock Market, Financial Spread trading is based on a simple concept. Individuals get the opportunity to back a trading judgment that they may have, that a particular market is going to rise in value or is going to fall in value. For instance, if you believe that the shares of Microsoft are going to rise in value, you would “buy” Microsoft shares. Conversely, if you believe that Microsoft shares are going to fall in value, you would “sell” Microsoft shares. You don’t actually own the underlying asset. You are simply trading on the price direction of the financial instrument. If your prediction is correct, you make a profit. If you are incorrect, you suffer a loss.
There is also provision of posting a “stop loss order” on every trade you initiate. A stop loss order is a way of reducing your risk exposure to the markets, which means that you can effectively limit your loss in the event of the price moving against your perception.
Spread trading is most easily explained through an example – the concept is the same whatever the market. Let’s assume that it’s October, and due to an imminent breakthrough in the cure for bird flu, the shares of XYZ Corp have been rising steadily over the past few weeks. You’ve been following the market closely, and decide you want to get in on the action. The shares of XYZ are currently selling at $42.14 per share. In order to buy shares in any listed company, you need to buy a minimum of 100 shares. This means that you need a minimum of $4214 just to buy 100 shares. However, you only have $150 risk capital. What can you do?
Well, given your limited capital, you can simply place a spread trade with a financial dealer on XYZ Corp shares to rise. Financial spread trading enables you to be highly leveraged because you actually trade on margin. Leveraged trading, or trading on margin means that you are not required to deposit the full value of your trade in order to open a position, so buying XYZ Corp shares at $1 a point is actually the equivalent of purchasing 100 shares of the same company. Thus if you are looking to buy 1000 shares of XYZ shares, instead of paying $42,140 for the shares, you can place a spread trade on XYZ shares to rise at $10 a point.
Let’s assume that you contact a dealer for a price on December contract futures in XYZ Corp and get a quote of 4214/4219. You always buy at the higher price, so you buy $4 per point at 4219. This means that each penny movement in the price of the shares is worth $4 to you. To limit your risk exposure to the market, you also place a stop loss order of 30 points, which means that should the market go against you, the maximum you could lose is $120. Over the next few weeks, the stock of XYZ Corporation continues to rise. Six weeks later, you contact your dealer, and the quote for December XYZ Corporation is now 4293/4298.
Because you’re trading futures, it means that the contract expires in December. However, this doesn’t mean that you have to wait until December before you close out the trade. You can close out the trade the same day or at any point before the contract expires.
You decide to take your profits and sell to close at 4293. Because the market went in your favor, you get your full deposit of $120 back. In addition, your profit on this trade is calculated as follows:
Closing level 4293
Opening level 4219
Difference 84 points
Your profit: 78 x $4 = $336
Financial Spread Trading is a derivative product. This means that you are trading on a price that is actually derived from the underlying product. Therefore, if you are trading Microsoft shares, a financial dealer would give you a “derived” price of Microsoft shares. As the prices of those shares go up and down, so would the dealer’s derived price of Microsoft shares go up and down.
Jide Hospedale
http://www.articlesbase.com/Investing-articles/financial-spread-trading-an-introduction-87652.html
Can someone edit/review my essay please?
its pretty short. I just need someone to read it and tell me if there are any changes i need to make here it is!
The Medieval period was a time of change all over the world. In medieval Europe between the years 600 and 1450 numerous changes such as the growth of trade in the Mediterranean, the power struggle between local authorities and the papacy, and the rise of the merchant or skilled trade class took place while still upholding general concepts such as the basis of feudalism, manorial economy, and Christianity.
Medieval Europe underwent an abundant amount of change. The first major change is the growth of trade in the Mediterranean. The crusades in Europe led to an explosion of trade in the Mediterranean sea. Artifacts are still being found today in northern Africa from Europe and vise versa. Another change would be the power struggle between local authorities and the papacy. in early medieval Europe the emperor had all of the power, but towards the end of the Medieval era the papacy had growing power and was limiting the growth of kingdoms. Evidence of this can be seen in the growing number of artworks found where religious officials are in power instead of the richer, upperclassmen, and also in the decline of empirical rule and increase in the churches influence over things like architecture and chivalry. A third change was the ride of merchants or skilled tradesmen. The guilds that existed in late Medieval Europe left their presence in the form of documents containing eligibility and regulations on the quality of manufactured goods, techniques of production, and in some cases prices at which the items needed to be sold. Medieval Europe was a time of change.
Trade in the Mediterranean grew tremendously at the time of the crusades. While Mediterranean trade had been important in the beginning of the era it underwent major changes and grew to new strengths. The expanded trade throughout the Mediterranean and all of the eastern hemisphere was a trans regional change because led to the spread of new ideas, technological advances, and the introduction of new agricultural products. The crusades had sent people throughout the Mediterranean and now instead of dealing mainly with Christians, trade was expanded to the Muslims. From them Europeans learned about Aristotle, astronomy, techniques of paper production, and how to cultivate new spices. Increased trade led to more modern developments throughout medieval Europe and the Mediterranean.
While Europe underwent many changes during the medieval period several fundamental ideas stayed the same. One continuity was the basis of feudalism. Fiefs and Vassals owed their loyalty to lords through all of Medieval Europe. Evidence of feudalism in medieval Europe could be the financial papers granting land to one man in exchange for military services. A second similarity is the use of a manorial economic system. Artwork shows peasants with expensive ox drawn plows which were hard to afford unless you were of the wealthy upper class. This tells us that the peasants must have been hired by someone to do the farm work which supports the idea of a manorial economy where peasants were given a small plot of land to harvest for their lords. A third continuity in medieval Europe was Christianity. Christianity influenced all parts of life from chivalry to the architectural styles. The influence of Christianity can be seen all over Europe in the form of churches and cathedrals. As well as in pieces of art such as stained glass and paintings depicting monks doing good deeds. Europe kept some continuities while the world around it changed.
Manorial economy stayed the same in medieval Europe for one reason, it worked. It provided the upper classes with workers and the lower class with money. It also formed small tightly knit communities on the manors. This economic system was beneficial for all that were involved and gave the idea of small kingdoms the chance to grow. Without the continuity of manorial economics the papacy would have gained power and small kingdoms never would have taken root, the lower peasant class would have turned to slaves, and the lords would have to tend their own farms. Manorial economy stayed the same because it was beneficial to all involved and an idea that accomplished the same goals had yet to present itself.
All over the world change was happening, in Europe this was seen in Mediterranean trade, the power struggle between local government and the papacy, as well as in the rise of the merchant and skilled tradesmen. Even though the world was changing. Europe kept some fundamental ideas such as the basis of feudalism, manorial economy, and Christianity.
haha glad to know you read it lol
Good Dude Good Writing Skills
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the research of your essay sounds good. You sound like you know what you are talking about, however I think you should separate the introduction, main and conclusion of your essay so it’s easier to read.
-always write the numbers in words when you are writing an essay.
-you mention too many times Medieval Europe was a time of change.
-keep your sentences short; such as the introduction:"In medieval Europe between the years 600 and 1450 numerous changes such as the growth of trade in the Mediterranean" – full stop there , mention it happened and then move to the next thing.
- in your sentences use more things like and..because of this…in order to..this leads/led to…in the conclusion of this fact…it will make your sentences more flowing.
- in your conclusion try including your own opinion as well what you thought of all the things you explained, this is likely to give you a higher mark.
also check your punctuation and spelling
Overall i think your essay is flowing, informative,and your information is supported with evidence which is most important.
Goodluck! xo
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university student
it’s good..
but asking it here may led to plagiarism.. aren’t you afraid that someone among your peers may just copy and paste as their essay?
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