What are Sprad Contracts?
Spread Contracts are a popular form of derivative trading,
which enables you to exchange the difference between the opening price and the closing
price of a future contract.
Using this trading method, you can speculate on the future movement of market prices regardless if they are rising or falling.
The basic Spread Contract trading principal is quite simple: Select any asset and choose to go long (BUY) if you predict the market price will rise, or go short (SELL) if you predict the market price will fall. Making a profit is possible either ways, whether it’s an up trend or a down trend movement.
As a general rule, the ask price (BUY) is always slightly higher than the bid price (SELL), while the gap between the BUY and SELL is defined as “spread”?. When opening a “BUY”? position, you buy from the market; therefore when closing it, you must sell it back to the market, and vice versa, when opening a “SELL”? position, you sell to the market; therefore, when closing it, you must buy it back from the market.
The price of gold is rising, but you think it will soon drop.
You open a SELL position on gold (4 ounces) at $1,250 an ounce (the bid price).
4 x $1,250 = $5,000
$50,000 x 0.3 price movement = $15,000
The contract is leveraged on a 1:50 ratio:
$5,000 : 50 = $100
This means you need at least $100 in your trading account
(initial margin) in order to open this position.
Gold then drops $20 in value.
You manually close the position and earn:
$20 x 4 (ounces) = $80
Your profit is $80
You did not buy any actual gold at no point.
All you did was investing on the commodity’s market performance.
Why trade in Spread Contracts?
Digital Exchange Limited offers modern traders a low-cost investing environment, where fixed spreads have replaced old fashioned fees, commissions and hidden charges. When you trade Spread Contracts, you can follow every stage of your investment and see all your potential profits, losses and expenses at a single glance. Digital Exchange Limited operates a slimmed down online brokerage with few of the costs that were associated with the old style investment houses and stockbrokers. These savings are passed on to our traders.
Traders at Digital Exchange Limited have instant access to up to x200 leverage. The only condition is that you maintain a sufficient margin reserve in your trading account to cover your leveraged trades. Leverage allows you to multiply the volume of any trade and potentially increase your profits by the same proportion.
When you trade at Digital Exchange Limited you can open leveraged trades on nearly 1,000 financial assets such as forex, stocks, commodities and indices.
Advantages of Spread Contracts trading
Unlike traditional trading, you don’t need to actually own any asset. As a result, this eliminates the need for any paperwork and/or contractual arrangements with any third parties.
Trading in Spread Contracts with Digital Exchange Limited is as easy as 1-2-3: Just register with your details, fund your secure trading account and start investing instantly.
LeverageLeverage enables you to gain a large exposure to any financial market with only a small amount of your capital. By doing so, you are able to increase your overall profits only because they are based on the total investment amount of the position.
DiversificationSpread Contract traders can potentially profit from both bull markets and bear markets. You can open leveraged positions either as buy or sell trades and exploit any market movement. The Digital Exchange Limited platform allows you to manage multiple investments simultaneously, with real time analysis and sophisticated account management. Our risk management tools and entry orders give you a high level of flexibility and control over every trade that you make.
Risk managementExercising good money management is always possible thanks to the stop loss/take profit parameters. By automatically closing any open position in case the price either drops or rises beyond a predetermined point, you can continuously maintain your risk levels conservative.
Profit opportunitiesIt is possible to profit from Spread Contract trading in both rising and falling markets.
You can either open a SELL position and profit as the asset price drops or open a BUY position and profit
as the asset price rises.
Who Can Trade Spread Contracts?
Online Spread Contract trading is already a highly popular form of investment with millions of traders worldwide. Almost anybody can trade Spread Contracts if they are willing to apply the basic principles of risk management. The Digital Exchange Limited online Education Center contains all the learning tools and educational resources that you need to begin online Spread Contracts trading.
Many of Digital Exchange Limited top investors signed up as absolute beginners with no experience of the financial markets. They used the Education Center and free Demo Account to master the basics of Spread Contracts trading. Spread Contracts traders range from novice investors who trade part time, to expert investors who manage complex personal portfolios on a full time basis. The Digital Exchange Limited platform gives you the freedom to set your own financial goals and manage your own investments.
- open a trading account
- Fund your account
- Get a premium training package and learn to trade
- open a trading account
- Fund your account
- Start Trading