What is Margin Lending?

Margin lending is the term used when you borrow money to invest in shares. There are various pros and cons of using margin lending to be able to invest in shares and while there are some people that extol the virtues of this kind of borrowing, there are others that will warn you against margin lending too.

When you borrow money, the bank makes sure that they take a form of security from you in order to ensure that their money is safe. In the case of margin lending, the security that the bank accepts is the shares themselves or the investment that you are making. Those who consider margin lending to be a good option feel that the maximum that you stand to lose is the amount of money that you have put into the stock purchase.

Margin lending therefore allows you to purchase some of the blue chip stocks that you would otherwise have never been able to purchase in the first place. This kind of an option is used immensely when a popular blue chip company is offering an IPO. Retail investors generally purchase the stocks with margin lending at a price and then when the rate shoots up on the opening day, part of the shares are sold off to pay back the loan immediately.

It should however, not be forgotten that margin lending can be risky business. The manner in which shares move can be so rapid that you may not realize before you lose out on all the amount that you have invested.

Essential Features of a CFD Trading Platform

With almost any kind of a market maker option that you choose for CFD trading, you are also likely to get a CFD trading platform that you shall be expected to use to make the trades. Before you choose a CFD online broker, you should take a good look at the CFD trading platform since it is one application that you shall be using fairly regularly.

The only way in which you can assess the CFD trading platform is by using it for a while. You can do this even before you sign up with the CFD trader because most of them allow for a period of trial for clients to evaluate the platform. Look at the manner in which the data has been represented and the specific charts and graphs that have been used. The data that is analysed and the manner in which it is represented can actually make a lot of difference to the information that you are able to pick out.

Each and every CFD trading platform that you consider should always have a stop loss option that you can exercise the moment you place a CFD trade. This is because you can suffer high level of losses with CFD trading just as you can gain manifold too.

Do not forget to note the hours that the CFD trading platform is available for use. You do not want to be in a situation when you want to place a trade and the platform just does not allow you to.

Features and Benefits of a CFD Tracker

A CFD tracker can help you in various ways when you are investing in CFD. The fact is that you need to be able to make your own decisions when you are trading in CFD in the direct market access mode. The CFD that you have invested in follows the same path as the underlying index and therefore the same factors that affect the price of the asset or stock will affect the CFD too. A CFD tracker can help you in understanding the right decision to take with regards to various stocks or assets.

A good CFD tracker should allow you to customize the financing option so that you can set the leverage to the one that you want. Some of the good ones allow clients to choose between 0 per cent and 99 per cent. While the leverage increases the profits that you can expect, you also stand to lose that much in case of a loss.

It is also not uncommon for a CFD tracker to include factsheets on various products and assets. These include details about spreads, margin rates, trading hours and other details too. Technical indicators are also provided in such a CFD tracker in the form of charts and graphs that can be referred to easily.

Another awesome feature of an efficient CFD tracker is that it allows you to invest right off the chart. So as you are browsing through the various assets and you feel that one of them is worth investing, you can just drag and drop the asset from the chart into your portfolio.

Benefits of CFD Training

Unlike trading in the stock market CFD trading does not require too much time to understand. However, this does not mean that CFD training is redundant and that you can jump into trading is CFD without any kind of CFD training. Despite the fact that trading in CFD is relatively simple, CFD training can provide you with some basic jewels of wisdom that you can use easily when you invest in the market.

CFD training will tell you that you do not need a large capital to invest in
CFD. Since you do not own the asset, you do not have to have the large amount of money to be able to trade. You need to just bet on the direction that the asset will go. At the same time you do need to know the tricks of the trade unless you want to lose money slowly.

When you take part in the simple and easy CFD training, you realize that you are entitled to dividends even though you do not hold the asset. You can also take part in corporate actions and stock splits. With CFD training, you learn how to use small amounts of money to make it large as your money grows with the high leverage that is offered in this investment.

Those who have been a part of CFD training know that they can even benefit from a falling market based on the kind of bet that they have placed. You only have to be right about the direction in which the asset is going.

All About Trading Platforms in Australia

Online trading has become a common thing these days. Almost anyone who is interested in making some money on the side also dapples in some kind of trading, be it share trading, forex trading, commodities trading, options or CFD. However, retail traders need trading platforms to be able to trade from the convenience of their homes of their office cabins too.

When you are choosing trading platforms in Australia you need to know a couple of things. Firstly, most of the trading platforms that you are likely to come across are created in Europe. This means that they may have some specifics that are associated with share trading in those countries that they are developed in. Look for trading platforms that are created in Australia or those that have been adapted from open source programming for the Australian market.

When you are looking for trading platforms you also need to know the kind of trading that you are likely to get into. There are various trading platforms that claim to be great for all kinds of trading irrespective of whether it is forex trading, share trading or commodities trading. However, the fact is that trading platforms that are created especially for different kinds of trading are likely to be the best.

Unless you are looking for trading in various kinds of investment options at the same time, choose one that specializes in the area of trading that you are most interested in. Try out the platform for the trial period that most trading platforms offer and then take your decision.

Benefits of Share Trading

There are many people who are extremely sceptical about share trading because of some horror stories that have been told about how people lost all their monies in share trading over a few months. While there is no doubt that you can lose large sums of money in share trading, it should also be known that share trading per se does not mean loss. The whole thing depends on the manner in which you invest.

One of the main benefits of share trading is the fact that you can own a part of the best companies that there are and benefit from the dividends that they pay. However, it is up to the investor to find out the companies that seem to be on the growth path.

Share trading can get you better returns over time than any other kind of trading. While real estate also proves to be a good bet at times, the capital that you need to be able to invest in land is extremely high. With share trading, you can diversify your portfolio and invest in various sectors so that you can hedge your risks to a large extent. You can also spread your investments over growth companies and those that are likely to bear fruits in the long run.

Unlike real estate, share trading is far more liquid. In case of an emergency, you can decide to sell short and at a loss if you need to money for urgency. Finding buyers for your shares is not something that is tough at any given point in time.

There is no dearth of information about the companies that you are considering for investment. Most of the financial channels offer analysis on various important shares that are catching the eye of investors too.

How Can You Learn to Trade CFD

The good thing about CFD trading is that when you start off to learn to trade in this area you do not have to spend months trying to perfect it. CFD trading is easier to learn to trade and once you have mastered some of the basic concepts, you are ready to go.

Some of the major reasons why people want to learn to trade CFD is because of the high leverage that it allows you. There is also the advantage of low commissions and the opportunity to gain in falling markets. When you learn to trade CFD you also hedge the regular portfolio that you have in an extremely effective manner. Despite the fact that you do not have to own the assets you still have the benefit of dividends.

With these benefits many people get attracted towards CFD. However, you need to learn to trade CFD in the right manner. Going after high leverages when you have just learnt to trade CFD is not a good idea. It is a good practice to slowly increase the leverage on your own. Only professional traders should look for leverage between 7 and 10.

Despite the fact that you are betting on the direction in which the asset will move, you do need to have some understanding of the underlying asset in order to be able to bet appropriately. A good trader who has taken the effort to learn to trade CFD will understand that keeping the CFD trading costs low can make a large difference in the overall returns from the trade.

Pros and Cons of CFD Trading

Before you start anything new you need to be aware of the advantages and disadvantages of the same. This is also the case with CFD trading, a different kind of trading than the regular stocks that you may purchase. When you know the pros and cons of CFD trading, you are able to maximize the benefits and watch out for the pitfalls too.

Pros of CFD Trading
The amount of leverage that you can expect with CFD trading is extremely large. You do not have to actually purchase the asset and therefore the amount of money required is also low. You do not have to bend towards penny stocks because you cannot afford the blue chip stocks now with CFD trading. CFD trading can be done on a large range of assets like forex, stock indices, shares, energies, commodities and bonds too.

Cons of CFD Trading
The massive leverage that CFD’s have can also prove to be a disadvantage since the amount that you lose is also manifold when you lose. The large leverage is therefore a double edged sword. You need to watch out for the financial fee that accrues when you hold a CFD overnight. So while there is no expiry date, the overnight charge needs to be looked out for.

The advantages of CFD trading far outweigh the disadvantages. The disadvantages are basically things that you need to watch out for and can be managed with some amount of planning and control. Getting the hang of CFD trading is also easier than any of the others too.

Basics of CFD trading

A CFD or contract for difference is a tradable derivative product. As the name suggests, CFD trading is based on speculation on the price of the asset it refers to. The settlement of profit or loss is done on the basis of price difference,

If you buy a CFD for AUD 25.50 and sell it after a few days at AUD 27.50, the counterparty to the contract, usually a CFD provider, pays you the difference, which is AUD 2. CFD trading is done in lots and depending on the price of the underlying asset, a lot may comprise of any number of units. In this example, if the CFD represents 100 units, your overall profit is AUD 200.

CFD trading employs a high level of leverage. This allows traders to initiate high value trades with a small capital. This is commonly known as margin trading. In CFD trading margins can be as low as 5%. So instead of having to put up 2550 dollars in the above trade, you employ only 127.50 but still get the full benefit of 100 units should the price move favourable to your position. A profit of 127 dollars on an outlay on 200 dollars is something that you cannot expect while trading directly in the underlying asset.

Besides the high level of leverage, CFD trading allows access to global markets from one platform as most providers offer CFDs for assets in international markets as well. There are no transaction fees. While buying, a trader pays the ask price, which is always more than the bid price, the price at which a trader can sell.

CFD trading has many advantages. However, traders still have to learn how to manage the risk associated with trading in markets.

Online Broker: Which Type Are You Looking For

In the context of trading in stocks and other financial instruments, the term online broker may refer to different types of individuals or business entities involved in the business of buying and selling in financial markets. A broker is a firm or an individual who charges a commission or fee for executing buy and sell orders on behalf of investors. Almost every traditional broker that matters has an online presence and acts as an online broker by providing clients with a trading platform. In that sense, an online broker is no different from brokerage firms that we are all know very well.

Technically, the role of a broker is limited to providing quotes and communicating orders to the stock exchange. However, it is highly competitive market out there, the reason why most brokers in the financial markets provide a host of other services such as market analysis and investment advice. Such brokers are known as full service brokers.

The internet has given birth to another breed brokers known as discount brokers. A discount broker is an online broker who executes buy and sell orders on your behalf for a fee that is much lower than a full-service broker and provides no other service.

There is yet another type of online broker, who although not a broker in the true sense of the term, is often referred to as such. Although involved in the business of executing orders, such brokers are primarily dealers and not agents. A broker is an agent who acts on behalf of a client and does not assume any risk. A dealer is a principal who trades in his or her own account and is party to a buy or sell contract. Such so-called online brokers are commonly involved in over-the-counter markets such as forex and CFD trading.

Global Markets: Investment Rules

There are many investors who want to expand their portfolios by investing in global markets as there is a huge potential for growth in emerging markets. Many investors, however, have difficulty in accessing a suitable platform for trading in global markets. One way that you can do so is to find a really good CFD provider who offers trades in CFDs based on financial securities across the globe. The decision to invest in global markets should be based on sound economic sense. One of the mistakes that investors tend to make is to get lured by high GDP growth rates revealed by emerging markets. A healthy GDP growth is a genuine indicator of the growth of an economy but the same cannot be said for stock market returns. It makes good sense to bet on the strength of a country’s currency on the base of its growth rates, but stock trading is a different ball game altogether.

When you buy stocks in global markets the performance of individual companies is of greater importance, just as it is in the case of investing in domestic stocks. For that purpose, investors need to study the fundamentals of the company and the general direction in which the country’s stock market is headed for.

Markets all over the world are the same; so are the basic investment rules. It is entirely your choice which of the two rules, fundamental or technical analysis, you choose for making investment decisions regardless of whether you are putting you money in domestic or global markets. However, invest on the basis of technical analysis if you have a short time horizon. But if you have a long term perspective, it would be wise to stick to fundamentals.

Contracts for Difference: The Simplest Derivative in the Financial Market

Contracts for difference or CFDs are derivatives that may refer to underlying assets such as stocks, forex, indices or any other financial instrument. Although similar to some other derivative products available for trading, contracts for difference are slightly different.

Contracts for difference refer to agreement between a buyer and seller stipulating that the seller will pay the buyer, or receive as the case may be, the difference between the current value of the contract and the value at the time the contract was made. The purpose is to allow traders to speculate on price movement; there is no commitment as to actual delivery of the underlying asset. Traders can benefit from downward price movements as well by going short or sell CFDs as prior ownership is not an issue.

It can be said that most of the features of contracts for difference mimic the features of derivative products such as call and put options and futures. However, there are some basic differences that need to be understood. Options involve attaining the right (although not the obligation) to buy the underlying asset at a fixed price at a later date. CFDs do not give this right to a buyer.

However, the biggest difference is with time value. The value of options decays with time. The time premium reduces as the expiry date approaches near. It is not the case with contracts for difference as they mirror the price of the underlying asset. It is this simplicity of pricing that makes CFDs more popular than other derivatives. Add the ability to employ leverage and you have the simplest derivative in the financial market.

Why Is CFD Training Necessary

CFD, a tradable financial instrument that allows traders to participate in the price action of an underlying asset without owning it has made it possible to trade in financial markets with little capital. The simple pricing of CFDs has been one of the major reasons behind its immense popularity. However, there are some complexities of financial markets which make CFD training necessary if you are new to the trading.

CFD or contract for difference is a derivative product that refers to and mirrors the price of an underlying asset, which may be a company’s share, forex or an index. It is an agreement between two parties, typically buyer and seller, to pay or receive the difference between opening and closing values of the contract.

Just as it is with any other business venture, a basic CFD training course will act as the first step on the road to the success of your CFD trading project. A basic course will explain the features of the CFD market, market terminology and how to identify winning trades. The next and also more important step is to take up an advance CFD training course.

Advanced CFD training courses are basically about teaching trading strategies for managing the risks associated with trading in markets. The CFD market employs leverage, which makes it possible for traders to initiate large trades with a very small capital outlay. While it increases the profit potential of a trade, there is also concomitant higher risk of loss, one of the major reasons why CFD training is necessary.

Top 3 Features to Look for in a CFD Trading Platform

The popularity of CFD trading has reached new heights these days. And with this level of demand there are many new CFD brokers that you are also likely to find in the market. Each of these CFD brokers seems to have their own CFD trading platform to offer. While the CFD broker and the CFD trading platform that you choose are linked, you need to know the specific features of a CFD trading platform that you need to look for.

1. The first thing that you need to ensure is that the CFD trading platform allows you to trade at all times of the day. This means that you should be able to trade in the wee hours of the morning when you want to trade in currencies of a different company.
2. The CFD trading platform that you choose should offer the option of back up and support so that you do not lose your data at any given point in time. In essence the CFD trading platform should be able to execute any kind of a trade that you want to execute without giving you any trouble.
3. A CFD trading platform that can be customized is another feature that you need to look for. This helps in ensuring that you are able to create a screen that allows you to access the areas that you want to.

Along with these features, you should also be able to ensure that the CFD trading platform that you are choosing shall not give you sleepless nights by malfunctioning.

Are all Stockbrokers the Same?

Everyone interested in investing in shares will need a stockbroker to help them buy and sell, since the general public are not licensed to do this. But not all stockbrokers are the same; their difference lies in what services they offer.

* Full service stockbrokers. Stockbrokers who offer what is called a full service offer a great deal of useful advice on the buying and selling of stocks, shares and other options. They not only tell you which shares are best, but which are best for you. This is because everyone has a different financial goal and a different level of risk they are comfortable with. So full service stockbrokers will tailor an investment plan especially for you and will do research into it and buy and sell the stocks, shares and other components for you. They will also charge you a fee commensurate with their knowledge and abilities, but you can be sure that your losses will be small – at least most of the time.

* The non-advisory stockbroker. Investors who are more confident in their ability to buy stocks and shares that will give them a good return on their investment will only need a non-advisory stockbroker. These stockbrokers will simply buy whichever shares you tell them to – and of course, sell them when you decide to sell. You could be making a big mistake and they may know it, but they will not be able to tell you so if they are in the non-advisory stockbrokers category.

Seven Tips to Find the Right Online Broker

Once you decide to buy shares you will need to find the right broker. Having a broker is vital to buying shares as you cannot do so without one. Increasingly, the online broker is very popular as they usually charge less and can be contacted via the computer often more quickly than by telephone. Here are some tips to choosing the right online broker. 

* The online broker should hold an Australian Financial Services License issued to them by ASIC.

* An online broker should have a variety of trading tools on his website such as charting facilities, the latest stock news, and up to date stock quotes.

* You need to ask the online broker how fast their orders are being executed. Online trading is much faster than other means – but they still have to be there to do it. Fast orders not only save time, they result in more control over your trading.

* Does your online broker get paid by order flow? If he gets a commission for sending orders to certain market makers it can lead to a conflict of interest. You need to know he has your interests at heart.

* Has your broker made an online trading demonstration platform available? If so how much does it cost to access it?

* If they do have trading platform software available is it easy to use and modern? If it is slow or unmanageable it will cost you in terms of lost opportunities and thus, profit.

* Do they have stop loss orders available to mitigate your risk further?

What is Margin Lending?

Margin lending is part of investing in shares, although you can invest in shares without margin lending. What happens with margin lending is that you borrow money to invest in or buy shares with. This money is often offered by the banks and you are required to open an account in that bank with which to transact. The money you borrow is added to your own principal to buy the shares, but the bank controls them so they are not actually your own shares.

While margin lending is looking on by favour by some - including the banks that offer you the money – it can be quite risky. While you do stand to make a lot more money than if you only used your own money, you also stand to lose a lot more. The big problem is that if you borrow money to invest in shares and they lose value, you will lose money that you do not own.

The banks don’t want this to happen because it means they will lose money too, so they require you to keep a certain amount in your bank account to cover a possible loss. If the value of the shares falls below this you will get a margin call. You either have to put up the money to cover the loss or the banks will sell off the shares – at the worst possible time for you. Shares should be sold off when they are worth more than you paid for them, not less. Of course, if you pick well and have lots of luck with the share price rising, you do stand to make more than if your portfolio were debt free.

Why You Should Learn to Trade

Trading on the stock market is not quite the same as investing, which is done on a more long term basis; trading is done in the short term. Anyone interested in trading on the stock exchange should first learn to trade properly by gathering as much knowledge about it as possible. This can be done through your own reading, or by paying for a course that will help you learn to trade. Such courses can be found online, or you can buy books about trading.

One good way to learn to trade that is offered by some stockbrokers is to have trading software that you use to imitate real trading. This can give you the confidence to trust your decisions as you learn to trade. The whole thing is set up as if you were really trading except of course you do not really buy and sell the shares. But all records are kept of your buy and sell decisions and you can see at a glance how much profit or loss you would have made if you had been doing it in real life.

While it is not hard to learn to trade shares in the stock market, it is a fairly risky way to make money for those who do not really have professional knowledge of the stock market. Of course, when you learn to trade properly you may depend on the expertise of a stockbroker rather than on your own expertise. In this way your losses may be fewer, but even then you are sure to suffer a few losses before getting that good profit you were after.

Benefits of Investing in Shares

Plenty of people are actually investing in shares in a passive way through their superannuation, but others like to take a more active role and have an investment portfolio of different shares that they invest in. Since investors in shares have the ultimate goal of making money from them there are several benefits of investing in shares as opposed to real estate.

* The main benefit to investing in shares is that there is a high level of liquidity. When compared with owning real estate and selling it to get a profit, owning and then selling shares can be done in a fraction of the time. So you can get your money back really quickly with shares, where you may have to wait months to sell your property.

* The 1200 companies that offer shares make it easy to choose which ones to buy to meet your needs. With real estate there are only a few choices, e.g. rental properties or commercial properties.

* You can buy shares for a smaller investment than real estate requires. That said, you can also buy shares in real estate – but you will not own the whole thing.

* You get a share in the company when you buy shares, so you get a small say in how it is run.

* You can make a profit two ways, by getting dividends from the company or by selling your shares once their value has increased.

* You don’t need to get a mortgage to buy shares like you do with real estate.

Reducing the Risk of Contracts for Difference

Every kind of investment carries with it some kind or amount of risk and Contracts For Difference are no exception. In fact, they could be considered as a high risk investment because you can easily lose more than you invest. However, there are ways to mitigate this risk somewhat and one particular way is to use what is known as a Stop Loss Order.

The Stop Loss Order can be set to whatever you choose. For instance you may buy cfds at $3.00 each and set the Stop Loss Order at $2.60. A stop loss order signals the cfd provider to close your position so that you do not sustain further loss. Unfortunately such stop loss orders can be slow in going through if there is a rush of like orders. And in the case of a dramatic and quick fall where liquidity is in short supply, you may still lose a great deal more than you intended. This is more of a problem on equity prices than indices and currencies that usually experience very active trading.

However you can also have what is known as a Guaranteed Stop Loss Order (GSLO), if your cfd provider offers it. You have to pay an additional charge for this benefit and there are certain restrictions imposed, but it is better than being subject to large losses if the market moves against your plan. So if you are planning to get into investing with cfds it is wise to find out all about how you can best reduce the risks inherent in such a product.