Online Trading Tools - Easy Investment Tools

Recog-nition is your information centre on Trading - Common Information for everyone interested in trading and to gain some insight into various types of investing.

CFDs and Spread Betting are two of the fastest and most exciting way to invest capital. Become involved a fast-paced market environment even from the comfort of your own home with a large range of online trading platforms.

Both of these types of trading are similar to one another, and are often placed in the same category. This is because neither require stamp duty, and in both cases the trader - that's you or me - takes a position (or 'bet') on the market movements. In both cases, the trader does not take ownership of the underlying share.

CFDs are traded on margin. What does that mean? Trading on margin means you can invest without a huge amount of capital, but it does mean that your losses could be massive. If you lose a 'bet', you will lose the entire funds plus you may be required to pay more in addition in order to cover the deficit. You will usually pay around 10% on a margin, and the broker will lend the remaining 90%.

Spread betting is often likened to gambling, and in fact is commission free. As with CFDs, it involves taking a bet on the direction the market will take. And again, you will profit or loss based on whether you have bet correctly.

Both CFD Trading and Spread Betting are high-risk ways to invest. Certainly they are both worth looking into and it will take a fair amount of background work to feel confident enough to trade.

It is worth considering this: can you afford to gamble your capital? What would happen if you lost your position (all traders will experience this at one point or another). It is best to use money which you can afford to lose.

FOREX Trading

What is FOREX Trading?

FOREX trading is the exchanging of currency pairs on the foreign exchange market. FX, FOREX or Foreign Exchange (whichever you decide to call it), is the largest liquid market in the world. Daily turnover is in the trillions and investors around the globe are constantly trading on currencies. Put simply, all currencies operate within a floating exchange rate, and the simultaneous buying and selling of different currencies is FOREX trading.

What are the risks?

As with most types of investment trading, FOREX trading is quite a risky way to invest. If you are new to the FOREX market, there are some questions you should consider – What is your risk allowance? Can you afford to lose all the money you choose to invest? What is your objective in investing in this market? For some traders, the risks are what make FOREX Trading so exciting and stimulating and hopefully rewarding.

When does the FOREX market start trading?

The FOREX market is a 24 hour market so each trading day starts in Sydney. The market then continues to move as each business day starts in every financial centre around the globe. As it is a 24 hour market, investors can respond to fluctuations at the time they occur, day or night.

Are there ways to manage risk with FOREX trading?

There are ways to manage the risk factors associated with FOREX trading. Stop loss orders and limit orders are the most commonly used tools in FOREX trading management. If the market moves against an investor position – a stop loss order will limit potential losses by ensuring that a particular position will be automatically liquidated at a pre-determined price.

CFD Trading – Contracts For Difference

What are CFDs?

Contracts for Difference – or CFDs – is a way for investors to trade shares without actually owning them. They are flexible trading tools providing traders the ability to go long and short, leverage their trades and hedge existing positions. The trader makes a contract with the broker and then bets on a certain stock price and what direction it will take. The trader will decide how many shares he will bet on. If he is correct on the bet, then when he chooses to close the contract he will be paid the difference between the opening and closing price – multiplied by the amount of shares in the contract. Should his bet be incorrect, he must pay the broker the difference.

How much do I need to open an account?

When opening an account, the minimum deposit required is usually around £10,000 when based on FTSE 100 shares. There may be a higher minimum deposit on lesser-known shares or overseas shares.

Do I have to pay stamp duty?

CFD trading does not require you to pay stamp duty. This is because you are not buying the underlying share.

What are the risks?

CFDs expose the trader to high risks as you not only risk losing the initial deposit you made, but you may also end up making additional payments to the broker. There are many reasons why the value of your investment could be affected – changes in the foreign exchange rates or volume of the marketplace are just two reasons.

Share Dealing

What is Share Dealing?

Shares will be listed on the stock market and each share is a unit of ownership in the company that has issued your share. So if you buy a share, you own a percentage of the company. Your stake and level of control in that business is dependent on how many shares you buy. You make a profit, through dividends.

The trader uses a broker to buy or sell shares in a chosen company. You the shareholder will profit if you sell your share when it rises. If it falls, you stand to lose money.

What types of shares are there?

The level of rights to the shareholder depend on how many shares they hold within a certain company and the type of stock they own. There are two main types – Ordinary share and preference share.

How do you buy and sell shares?

Stock brokers are the most common way to buy and sell shares or stocks. Most brokers will be listed with a stock exchange and they vary in the service they provide. All stock brokers will charge a fee for each trade made, this is the ‘transaction fee'.

When looking for a stock broker, you will need to ask yourself:

• How fast can I buy and sell?
• How much advice will I need?
• What are the fees?
• What features do they offer?
• What software is available?
• Is this stock broker regulated?

Futures and Trading Options

What is Futures Trading?

• Metals
• Grains
• Energy
• Cotton
• Beef
• Currency
• Timber

What is a futures Contract?

Futures Trading means you do not actually have to own or buy anything. You are simply speculating on the commodity and which future direction its price will take. A futures contract means the trader sells or buys a commodity for a set price and pre-determined time period. The trader is then obliged to buy or sell that commodity at a future date.

Spread Betting

What is financial spread betting?

Financial spread betting is very similar to CFDs trading. It allows the trader to take a position which direction a market will take. Like CFDs trading, the trader does not invest in the share.

How does spread betting differ from CFDs trading?

Unlike CFDs trading, financial spread betting are not subject to capital gains tax and does not require the trader to pay any commission. They do this by charging a slightly wider bid offer spread than is the actual market price.

What are the advantages?

• Tax and commission free trading.
• Benefit from versatile markets.
• Does not require a large amount of capital.
• Does not require much trading experience.
• Easy method of investing

What are the risks?

• Spread betting is a high-risk activity
• Can make substantial losses
• Requires research before begin
• Markets volatile