Information for NON UK Residents

Our course is based on *Spread trading, which is unique to the UK.
However, there are facilities to open 'certain types' of accounts
for International clients. You will need to visit the Spread trading
Web site and read their 'Opening Account' criteria. Usually for
clients outside the UK it involves a monetary deposit.

*It's called 'Spread Betting' in the UK. This has nothing to do whatsoever with spread trading commodities which is where the confusion arises in USA traders who read this. A more detailed explanation of the difference is at the bottom.

Example...

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Limited Risk Deposit Account

You can only place Controlled Risk bets (or 'buy' traded options). In both cases, the maximum amount you can lose is known exactly in advance. You must have sufficient cash in your account to cover the maximum possible loss before you open each bet.

• Account can be opened online
• Available to UK and non-UK residents
• No evidence of funds required

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In a country where there are no Spread betting facilities, clients
have adapted the course to trade other trading vehicles such as
Dow 'Futures' or other 'Daily Cash' financial derivatives such as Diamonds.

The one we recommend is the mini-Dow. Within market hours
the spread on this contract is as low as 1 point. A 1 point move
on the mini-Dow = $5.00.

First off let's get this common email question out the way...

Q) If I live in the USA can I still open an account to spread trade in London and will it be tax free ?

A) No. The US government has effectively banned all gambling of
any description in your country. Meaning that you can't make
payments with your credit/debit card to any form of betting
outside of your country.

It is actually illegal for you to place bets online or even by telephone. This is governed by the "Wire Wager Act". (The real reason for
making it illegal is that they're not able to collect taxes made
from your profits.)

Consequently, British exchanges will not accept accounts from
anyone wishing to bet from within USA territory.

Hence no investment/betting/gambling accounts can be opened
for US citizens.

US citizens are taxed on all income worldwide, whether you live
in the US or not. The only way around it is to give up US
citizenship and adopt a new country.

Spread betting/trading is classed as gambling in the UK. The
course is primarily used by US clients for trading, through their
broker, the emini Dow or/and Diamonds.

We tell you how to trade the Dow. However, we can't tell what
derivative to use to trade the Dow. If we did that, then
we would need to write a separate course on every possible
derivative that could be used, from the mini-Dow to CFDs to
spread betting, futures and financial market betting such as
BetonMarkets.

You will therefore need to adapt the course to your own specific circumstances.

The course screen shots are based on the spread broker (Deal4Free), therefore you will have to make allowances for those screen shots and apply them to your own trading situation.

ways to trade the Dow

The most common way is to use futures contracts.

You can choose either the 'full size' contract, or the 'mini' contract.

The mini has far smaller margin requirements than the full size contract,
and is only one fifth the size, an interesting insight that explains why it
tends to be the contract of choice for most traders, as it only moves $5 for each point the Dow moves. You can buy or sell these contracts, allowing you to take advantage of the Dow Index whether it is moving up or down.

Another popular way to trade the Dow is via ETFs (Exchange Traded Funds). The symbol typically used for this is DIA which means, of course, that most traders refer to them as 'Diamonds'. Diamonds are traded almost like a stock.

The other 2 ways most traders play the Dow is by 'contracts for difference' (CFDs) and 'spreadbetting'.

Exchange Traded Funds

The Dow ETFs are known as 'Diamonds'.

Basically, ETFs trade like ordinary stocks. They track the security they are based on, but at a much lower price. The DIA, for example, is about 1/10th the price of the Dow itself.

If the Dow rises, so does the ETF. If it falls, so does the ETF. You go Long on an ETF by 'buying' it, just like you would buy Csco or Yhoo. You go Short by selling it. Your broker may have rules about shorting that you should check up on, but apart from that, the procedure is pretty much the same as futures contracts.

Spread Betting and Contracts For Difference.

These two trading methods are similar, so we will start with CFDs. Like a futures contract, CFDs have a 'spread'. This spread is likely to be larger than on the futures contract, but then again, you usually require to put up less margin (i.e. they are more highly leveraged than futures).

Basically, if you think the Dow will rise, there is someone else out there
who thinks it will fall. This difference of opinion is the basis of the
contract.

The broker company facilitating the contract puts you together with the
other person, charging by use of the 'spread' (which is why it is larger
than on futures). If your insight makes you think the Dow is rising, the
broker puts you together with a person who thinks the Dow will fall. He then opens a real position himself, effectively at zero risk, selling it to you and the other person less the spread commission he charges.

Like a futures contract, the mechanics are simple - you buy to go long at the ask, and sell to go short at the bid. As CFDs are more leveraged, they are inherently more dangerous, of course.

Spread betting is very similar to CFDs except that in some jurisdictions,
profits are tax free. Also, the spreads tend to be the widest of any method because of this, and very little margin is required relative to a
traditional trading account. Nowadays, spread companies online systems look just like real futures trading screens, with charts and online order placement systems.

TRADING SPREADS: Purchasing two contracts at the same time.

Most American traders get confused when seeing the UK Spread Betting sites. They get completely the wrong idea of what spread
betting is in the UK.

So to clear up this misunderstanding (and to give UK residents
an idea of what spread trading means in the USA) here is a
snippet...

A 'spread' is most commonly a simultaneous long and short position
between two related markets [in the UK it's simply the difference between the BUY and SELL price].

A spread position usually [but not always] entails a reduced risk of overnight, abrupt, unexpected events that might otherwise put an outright position to the sword. There is also the reduced risk of the floor traders running the stops. This normally reduced level of risk allows the exchanges to reduce margins for spread positions.

A spread may reduce risk but also limits opportunity. That reduction in
margin however allows not only for multiple positions but also greater
opportunity to diversify. Another reason to trade spreads is that the
relationship can change even when underlying markets essentially do not.

Suppose corn is stuck in a range between 2.00 and 2.20 and wheat between 3.00 and 3.25. If within those ranges corn declines while wheat rises, a spread between them can move 0.45.

Thus while a trader holding an outright long or short position can make
money only if the market moves in one direction, a spread can move
favourably in several different ways...

• Long side rises faster than short side rises;

• Long side rises, short side remains unchanged;

• Long side remains unchanged, short side falls;

• Long side falls more slowly than short side falls;

• The Favourite: Long side rises and short side falls.

Of course a spread is vulnerable to the opposite of each of the above
possibilities. So a spread trader needs to be vigilant and cannot
afford any complacency.

Spread trading is the way the old-timers did it, and it is a way that
still works. Spread and 'seasonal' trading are almost a lost art these
days, and you have to wonder why! If you're a position trader,
what better signal can you have than that this is the time of the
year when the bonds have gone up 15 times in the last 15 years?

There are a number of good reasons to trade spreads:

1. Very low margin requirements.

2. Much better odds of being successful than with futures or options.

3. Every spread trade has you hedged. You give up the risk of price
movement and replace it with the smaller risk of the differential in
the spread.

4. You are immune to stop running because you are in two different
related markets, or two different months of the same market.

5. Spreads take away much of the volatility of most futures trades.

6. If you are only half right about the spread, you can drop the
losing side and keep the winning side.

7. You have the benefit of the fact that most seasonal spreads have
very high percentages of being correct. Much more so than outright
seasonal futures trades.

So why don't more people trade them? Because the industry has
kept the public largely ignorant of spread trading. How many books
have you seen out there that deal with trading spreads? Yet trading
them is relatively simple. You buy one contract and sell a different
contract at the same time via a spread order, or you leg into each
contract on your own, as two separate transactions.

If you enter a spread by legging in, the computer will pick up the
fact that you are in a spread and will hold you to only spread
margins. Either way, you will pay two commissions, but the commissions are not a major factor considering that you will put up only fractional margins. Margins on spreads run about 1/5th to 1/4th those of outright futures trades.

For example, a trade in Soybeans will run you $1,350 per contract. But
for a Soybean spread you will put up only $270, or 20% of the margin
needed for an outright futures trade. Yet every point in the
spread will be worth exactly the same as every point in the futures
($50). This means that the return on margin for a soybean spread
is five times that of an outright soybean futures trade.

Example...

Let's say that in June you decide to buy a July Corn futures and that
Corn is moving up sharply due to a lack of rain in the corn belt. You
submit your order to the trading floor. Since all of a sudden everyone
wants to buy Corn, the floor broker has trouble filling your order to
buy. Although there is no requirement for a floor broker to sell to
you [to make a market], he sells to you because he feels that it is
his role to act in the capacity of a 'market maker.'

What do you think is the first thing that floor broker is going to do
once he sells to you? He is going to spread off on a back month of
corn, or the same month in wheat or beans. He will hedge (spread) his
position until he sees an opportunity to unload that short corn
contract in a profitable (to himself) situation.

Apart from the profits made by an exchange, the markets exist for the
benefit of hedgers. All hedgers are 'spreaders.' They are 'long' the
underlying and 'short' the futures, or vice-versa.

Spread trading is probably the easiest way to trade. It beats both
options and outright futures trades and is a very relaxed way of trading.

OFFICIAL US LEGAL WARNING : (a) investments made pursuant to the courses involve high risks and purchasers can lose a lot of money. (b) successful paper trading using techniques contained in the courses does not mean that purchasers will be able to trade successfully in actual market conditions when their funds are at risk. (c) investments in securities can result in the loss of all of the money invested. (d) investments involving commodity futures contracts or the granting of options can result in the loss of more than the money invested; (e) investments in commodities entail significant risk of loss. (f) past results are not necessarily indicative of future results.