Spread trading international indices
Let’s say you’ve been watching the FTSE 100 and you think the index is going to rise. You decide to put a long trade on.
When you logon to your spread trading
account, the bid price of the FTSE 100 is 7,026.5 and the offer price is 7,027.5.
The bid price is the selling price. In other words, the price you’d enter the trade at if you put a short trade on.
The offer price is the buying price. As you want to put a long trade on, this is the price you enter the trade at.
The difference between the bid and offer price is the spread. This is where spread trading companies make their money.
With spread trading, you need to decide how much to risk per point. The more you risk, the higher your potential profits or losses.
How spread trading the FTSE 100 works
You decide to risk R10 a point. If the FTSE 100 rose to 7,037.5/7,038.5, you’d make R100. If it falls to 7,017.5/7,018.5, you’d lose R100.
If the trade goes the way you hope and the FTSE 100 rises 50 points from 7,027 to 7,077, your spread trading company is now quoting 7,076.5/7,077.5. You decide to take your profits for a gain of R490 ((7,076.5 – 7,027.5) x 10).
If the FTSE 100 fell 50 points, you’d lose R490.
You can trade many major international indices through spread trading companies.
So there you have it. How you can trade international indices like the FTSE 100.