Best Spread Trading Platform for Beginners
Spread trading is arguably the most straightforward method of speculating on financial markets and it continues to grow in popularity. With spread trading, you can back your judgement on whether the price of a financial asset, such as a share, currency pair or stock index, will rise or fall. You never physically buy or sell, the underlying asset. Instead, you look to profit from a rise or decline in the asset’s price. Spread trades ‘derive’ their prices from the underlying asset and this is why they are known as derivatives. When you spread trade, you take control as there’s no need to instruct an intermediary to act on your behalf. You can also trade in a size that suits your risk appetite, something that isn’t possible when using other financial products. In order to spread trade, you first need to open an account with a spread trading provider. The purpose of this blog is to highlight the most important factors to consider when you’re making this choice. But before we do that, here’s a brief description of how spread trading works.
How does it work?
After you open an account, you’ll be able to see a trading platform where the dealing prices for a selection of financial instruments are displayed. These prices are constantly updating, reflecting market movements in the underlying assets wherever they are traded around the world. The first thing a beginner will notice is that there are always two prices for each market. The lower one is the price at which you can sell, and the higher one is the price at which you can buy. The difference between the two is the ‘spread’ which is the cost of trading. So, that’s a short outline, but how do you go about choosing a suitable provider?
Only use licensed providers
Firstly, it’s very important that you only deal with companies that are properly licensed. You will be depositing your money with them and you need to know that these companies are conducting their business legally and fairly. In addition, proper regulation ensures that all staff are subject to rules laid down by the regulator and must carry out their duties accordingly. A failure to do so can lead to significant fines, sanctions or even the closure of the business. Unfortunately, not all spread trading providers are licensed, and unregulated providers should be avoided at all costs.
Regulation is global
There are a number of financial regulatory bodies around the world which police the industry. Their attitudes to risk and customer protection can differ quite markedly from one another which means they can have different standards when it comes to customer money and managing risk. Do some research and only use a company that is properly regulated. In the UK this would mean a license from the FCA (Financial Conduct Authority). To be absolutely certain that the provider is regulated, the FCA has a register which you can access here.
At Trade Nation, we take regulation very seriously. We operate in a number of different geographical locations and are licensed accordingly. In the UK we are regulated by the Financial Conduct Authority (FCA) and we’re fully compliant with the European Securities and Markets Authority (ESMA). Your money is held in a segregated client bank account at Barclays Bank in London and we’ll never use your funds for our business activities. When you become a member of Trade Nation in the UK, you are also covered by the Financial Services Compensation Scheme (FSCS), which guarantees a return of your funds up to £85,000. In Australia, we are regulated by the Australian Securities and Investments Commission (ASIC). We are regulated by the Financial Sector Conduct Authority (FSCA) in South Africa and in The Bahamas by the Securities Commission of The Bahamas (SCB).
Look out for consistent pricing
When you’re looking for your perfect spread trading platform, the spreads themselves are a vital consideration. As outlined earlier in this blog, the spread is the difference between the selling price and the buying price of the market you’re trading, and this is what your provider charges when you open and close a trade. To make a profit, you have to overcome this spread.
Low and fixed
Obviously, you want low spreads as this keeps your dealing costs down. But most importantly, you want certainty about what the spread will be at any particular time. Spread trading providers are always boasting about their low spreads. For instance, you’ll often see a company claim: “Spreads from 0.1…” on a currency pair, for instance. But it’s more than likely that these spreads are variable. In other words, the spread will widen significantly when markets get busy or volatile. At Trade Nation, we pride ourselves on consistent, low pricing that represents the best value in the industry. We don’t increase our spreads when markets get busy or volatile. And we don’t narrow our spreads for short periods of time as a marketing ploy. Our aim is to keep our dealing costs as transparent and straightforward as possible.
Spread trading can be daunting and full of ‘what if’s’ particularly when you’re just starting out. When money is involved in fast-moving markets you can’t help worrying about what happens if something goes wrong. At Trade Nation our Customer Success team is always on hand if you need help quickly. They are available online or over the phone if you’d prefer. Our company has well over 200 years combined experience in the spread trading and CFD industry, so we know how to provide our customers with a first-rate trading experience. Also, when choosing your provider, make sure that you check out online reviews for every company you’re considering and see what kind of experience other people are having.
Find an easy-to-use platform
If you’re trying to make sense of spread trading, the last thing you need is a complicated trading platform. Trade Nation’s platform is perfect for beginners because we’ve stripped it down and made it clean, uncluttered and intuitive. But you still have access to a large range of markets across all asset classes from one single trading account.
We know you have a choice of who to use as your trading provider, which is why we are always working to make sure your experience with us will keep you coming back to Trade Nation. We hope that you’ll find our platform and all our services, from our dealing desk to our back-office teams, approachable, transparent and efficient. On top of this our Customer Success team is dedicated to giving you a first-rate personal service, which is exactly what you need when you start spread trading. We offer spread trading as it should be. No fuss, nothing hidden away - just low fixed spreads on hundreds of markets.