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Play to Learn & Make Learning Pay

26 March 2015 One Comment

000019093094It can take quite a while to get to the point where someone can feel comfortable playing the markets. For many such reservations are enough to keep them out of the market for good. It can seem as though wading through all the complexity and learning a whole new vocabulary is more trouble than its worth.

Needless to say, this is a mistake. There are, however, ways to soften the blow, to develop a familiarity with the way markets and market operators work and thereby to open up the possibility of a more secure financial future.

Inevitably, the most glaring bar to entry in financial trading at any level is a limited supply of capital. For those fresh out of college and still paying down any college debts that is hardly a unique scenario. However, whilst penny shares offer at least a way to dabble in the market a more grown up alternative is increasingly available.

A convenient alternative

Financial Spread Betting (FSB) is – as the name suggests – a way to bet on the movement of stocks, shares, commodities, currencies and market indices (e.g. the Dow Jones index). Any reputable spread betting provider will provide step by step training and educational modules that will take you, in practical steps, through exactly what is involved.

Rather than reading overview texts that talk in general terms without explaining precisely who to talk to or which websites to log on to these tutorials offer a ready-made pathway to a comprehensive understanding of what FSB – and by extension market trading more generally – has to offer.

 For example, the UK-based Tradefair website provides a breakdown of precisely what is at stake and how the mechanics of any trade operate. Even more usefully, they even provide a free demonstration module that requires no investment but which nonetheless represents exactly what happens once actual cash is invested. Needless to say, such free-to-play resources are the ideal starting point.

Easy access

Once that rudimentary level of understanding is reached – which in reality is no more than a matter of minutes – visitors to the site are able to start playing from as little as an initial $50 deposit. This is obviously considerably less of a financial commitment than is usually required to make buying stock in any way viable. From that point on the software suite that such providers make available allows users to place their own bets as and when they choose. There is no third party intermediary, bets can be placed and cashed out at the click of a mouse.

A further enabler in this setting is the fact that FSB operators provide access to global markets 24/7. This means that trading need not be restricted to the hours when most of us are getting on with the day job.

Tread carefully trade conservatively

The price of that ready availability and ease of access is the level of risk involved. FSB is a highly volatile way to trade and it is quite possible for careless investors to lose considerably more than their initial deposit. On this basis it only makes sense to trade at minimal values and to scale up any activity once a level of familiarity and competence has been established.

That volatility derives from the ‘spread betting’ element of the deal. At its simplest a player commits a stake – say a dollar – to the movement of a particular stock. For every move in the right direction the player wins a multiple of his stake – i.e. another dollar in our example. The downside is that if the stock moves in the other direction losses are calculated on the same basis. There are, inevitably, layers of sophistication beyond this simple illustration, but the basic binary (up or down) logic of this example underpins everything else.

FSB is often viewed as a kind of recreational toy by hardened traders, but such a view is itself instructive. Toys are, after all, the tools that help us all learn as kids. The same logic works just as well now that we are at a different stage in life and dealing with what appear – from the outside – to be more complex and forbidding undertakings.   

One Comment »

  • Sam said:

    Interesting recommendation…I personally think there are some better options to get your feet wet in the market if you don't have much capital than spread betting. Something like buying into an index fund would provide a great opportunity to put some skin in the game and give you a reason to keep an eye on the market.

    Discount online brokers also have brokerage as low as $5/trade now which makes investing even as little as $500 worthwhile now.

    Plenty of ways to get involved in the markets nowadays, good to see.