Outlined below are the main benefits of Spread Trading over traditional share investments:
Tax Free*
With Spread Trading you are placing a bet rather than buying a share. As a result, because you never take ownership of the share or asset, you have no capital gains tax liability. This saves you 25% straight away over buying shares through a broker.
Better still you have no Income Tax liability and there is no Stamp Duty to be paid on your trades.
* Note: Tax laws in the Ireland may change.
No Broker Fees, No Commission, No Annual Charges
When you spread trade the only cost involved in each trade is the spread itself. That’s why it is important to check the spreads the various spread trading companies offer before you decide who to open an account with.
Once you do open a spread trading account there are no annual account charges as is the case with many traditional brokers who can charge up to €100 per year to use their online trading platform. There are also no broker fees or commissions charged each time you open or close a trade. Combined with the tax benefits outlined above it all adds up to a very efficient way to trade the markets.
Profit From Falling Markets
One of the unique benefits of spread trading is that you can go Short as well as Long. This allows you to bet on a share’s price falling and if you are correct in your prediction make money from that trade. Given the turmoil we have seen in the global financial markets over the last 18 months, with many shares losing up to 90% of their value and pension funds across the world seeing massive falls in their value, having the option to short shares has never being more important.
Low Initial Outlay
Spread Trading is a leveraged investment which means it allows you to open a trade by only putting up a fraction of the total value of the trade. Most spread trading companies use what is referred to as the IMR (Initial Margin Requirement) when calculating amount of money you need to have in your account to open a trade. This IMR varies between the different spread trading companies but is typically somewhere between 2% and 20% depending on the trade you are opening. This means that if for example you wanted to open a trade on CRH at 1700 and the IMR was 15%, you would only need to have €255 in your account for every €1 stake you want to trade. While there are definite benefits in that you can start spread trading without needing to have a lot of cash in your account it is important to remember that leveraged trading also carries additional risk. While the rewards are magnified due to the leveraged nature of your trades, so too are any losses if a trade goes against you. See our risks section for further information.
Wide Range of Markets to Trade
Spread Trading offers you the chance to trade all sorts of markets, not just individual shares as is the case with traditional brokers. You can also trade the currency markets, oil, gold, interest rates and bonds to name but a few.
No Foreign Exchange Exposure
Most Spread Trading companies allow you to have your account in a single currency (e.g. Euro / GBP). This means your trading funds, the stakes you put on your trades and all profits or losses are in your selected currency. This removes the risk of currency fluctuations impacting the profits (or losses) you make on your trades. It also simplifies your trades and the management of your account as you always know where you stand and don’t have to try account for currency swings.
