CFD trading expert Joshua Raymond, Market Strategist at City Index (http://www.cityindex.co.uk/) summarises financial activity on 12th January as the FTSE rallies on the back of a Portuguese bond auction.
Joshua Raymond, Market Strategist, City Index commented:
“The FTSE posted gains for a second day in a row with banks providing much of the energy behind the gains after a successful Portuguese bond auction settled investor nerves concerning sovereign debt and speculation that banks were courting suitors for government stakes.
Near 3% gains on the day for the banking sector in London alongside 1.8% gains for the mining sector paints a picture of healthy appetite for risk amongst investors. The latter of those two sectors, the miners, has benefiting particularly from gains in the price of Copper and positive broker action at Deutsche Bank, who upgraded their views on Kazakhmys and Vedanta Resources.
It’s another positive day for the markets with the FTSE 100 attempting to pull away yet struggling to break resistance at the 6050 level.
There has been a notable step in the right direction for a calming of nerves concerning the European Sovereign debt situation today with investors bulled by a successful Portuguese bond auction and hopes that the emergency EU liquidity fund may be propped up.
With the Spanish Ibex and Italian Mib Indices both posting gains of 4% and 3% respectively today, this can be seen as an important confidence boost from investors that their sovereign debt fears could be waning. That said, investors are likely to want to see affirmative action from the EU first and this means we are still some way from being able to draw a line through this issue just yet.
All eyes will now be on Spain’s bond auction tomorrow to see if they can create a similarly confident stock market response. Both Spanish and Italian Indices slumped 16% and 12% respectively last year.”
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22 OctCFD Trading Commentary: FTSE rallies in choppy trade after successful Portuguese bond auction
05 SepAn Introduction to CFDs
What Are CFDs?
CFD (Contracts for Difference) trading is a method of investing that allows you to trade on a range of financial markets, such as indices, including the FTSE 100, Dow Jones etc., shares, forex, commodities or bonds, without owning the actual financial instruments traded in these markets.
A CFD is a financial derivative product. In equities CFD trading, it is an agreement that allows you to exchange the value differential of a share between the opening and closing time of the contract.
Going Long or Short
CFDs allow you to go long or short. Going long is a way of saying ‘buying’, while going short refers to selling a market. For example, if you believe that the underlying price of a market will rise, you can buy; if you believe prices will fall, you can sell. Going short, therefore, allows you to potentially make profit (or loss) from falling market prices.
The ability to go long or short using CFDsmakes these derivatives a flexible financial product; profits/losses can be made whether the market rises or falls.
Leverage
CFDs are a leveraged product. When you buy company shares, for example, you are required to pay the total value of the shares, plus, depending on your share trading platform, stockbrokers’ fees, commissions and stamp duty. CFDs, on the other hand, allow you to place a deposit that commands a potentially larger financial position.
Depositing a fraction of your total trade value still gives you full exposure and can result in enhanced financial gains or losses. The typical profit (or loss), after all, of your CFD trade is the total value realised once you close your CFD trade minus any broker’s commissions.
Like spread betting there is no stamp duty* on CFD trades. However because Contracts for Difference and spread betting are both leveraged forms of investment, they carry high levels of risk and it is possible to incur losses that are in excess of your initial investment.
If you are investing with Contracts for Difference or financial spread betting, you should always speculate with funds you can afford to lose; always make sure that you understand the risks involved when trading with these investment products. Like the warnings tell you, it is important to be aware that these products may not be suitable for all kinds of investor and, where you think it is necessary, obtain impartial trading guidance.
Managing Risks
Leverage can lead to both enhanced profits and losses, depending on the movement of the market and your trading decisions. Leverage is one of the main attractions of CFDs for many traders. Note though that you can limit your potential losses, before you sustain them, by using a number of risk management tools.
A commonly used risk tool is a ‘guaranteed stop loss’ order. A guaranteed stop loss order will automatically close a CFD trade once it passes a level in the underlying market that you set. Therefore if a market moves against you your trade will be closed and your losses limited.
* According to present United Kingdom and Irish tax law. This might change or differ subject to your personal situation.
28 AugIndex Mutual Funds- Ensuring Stability Of A Specific Financial Market
Mutual funds come in a number of different categories, which all vary according to the rates of return, risk factor involved as well as the period of time they take to mature. An index mutual fund is a category of investment that seeks to ensure stability of a specific financial market, regardless of the prevailing market condition, be they good or bad. They do so by tracking the indices of the securities in a particular investment.
To ease the tracking movement, there is a software that one can make use of. The software requires little human input and hence, there is minimal interference with the records. This means that index mutual funds therefore require no form of active management and can do well in passive management. This directly translates to lower management fees and lower taxes as well.
Index investments can be bought from many investment managers, some of which include Dow Jones Industrial Average, the Wishire 5000 and the FTSE 100. Other indexes have been personalized by some individual companies in order to be able to develop investment pricing systems. The indexes, whether personalized or captured in a software, should be guided by research which touches on dividends, earnings, book value and sales as well.
There are many methods of creating indexes and one should be aware of the different methods, incase they would want to understand the differences in the methods. One of them is the traditional indexing which is the practice of owning a collection of securities in the same ratios as the target index. The synthetic indexing is the use of a combination of equity and low risk bonds. The combination is meant to replicate the performance of a similar investment.
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22 AugCFD Trading and Spread Betting Update: Equity markets post new highs in subdued early trading
In his daily EU market update for 17th February, Equity Analyst Sean Power of and CFD trading provider City Index takes a look at the day’s market activity, including a second day of upward momentum for the UK equity market.
“A second day of upward momentum helped to push the UK equity market to its highest level since May 2008. The FTSE 100 briefly broke the 6100 level to post a high of 6101, before looking to retreat to parity by 9am GMT in a quiet early morning session. Miners and financial stocks propelled the index higher and helped to offset losses in BAE Systems. At 9am GMT the FTSE 100 was trading +1.6 points at 6086, with the DAX at 7413, down 1 point, and the CAC 40 +2 points at 4153.
Miners were buoyed in early trading following an upgrade to overweight for BHP Billiton by Morgan Stanley. The world’s largest miner led the way in early trading, gaining over 1% to post a high of 2490p, +26p. Other miners followed suit giving the UK leading index the impetus to push toward the 6100 level.
Financial stocks also gave investors reason to celebrate Thursday morning with +1% gains for most constituents. RBS, Lloyds, Barclays and HSBC were all members of the top 10 risers in early trading as investors followed Evolution’s ‘Buy’ rating for RBS this morning. At 9.30am GMT RBS was trading +3.8% better on the day at 49p, with Lloyds +2.4% at 68.7p, Barclays +1.8% at 338p and HSBC +1.8% at 734p.
The biggest loser in early trading was BAE Systems, Europe largest defence company, who failed to impress investors and analysts alike with their full-year update. BAE traded to a low of 342.8p in early trading, -3.6% on the day, after confirming 2010 results failed to meet analysts’ expectations. Net income last year was £1.05 billion, missing the widely expected £1.13 billion figure. BAE also remained cautious over the outlook for 2011, stating that revenue will fall in the coming year as the UK government looks to cut military spending.
The first hour of trading had a very subdued feel to it, which was evident with the ease and speed at which the 6100 mark was reached and then retreated from. In quiet sessions volumes are thin and markets can make ‘false’ moves, which can be quickly reversed. With no real negative news at present the markets could continue to drift slowly upward. Unless there is any market moving news released during the remainder of this morning’s session, one should be wary of any excessive ‘false’ lurch in either direction by the market. Until the US trading session begins investors should trade cautiously given the quiet nature of today’s market.”
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Spread betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.
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