Currency Trading Account - Spread Betting Vs Covered Warrants

Looking to open a currency trading account so you can earn all those millions up for grabs by trading in the foreign exchange (Forex) market? Chances are you'll be led in the direction of opening a spread betting currency trading account with one of the hundreds of online brokers out there. But is this really the best option? Covered warrants may be better for the newcomer to currency trading.

Few people who open a spread betting account realise the dangers of losing substantial amounts of their money, even with stop losses in place. You are most vulnerable to losing your money if you don't have a great deal in your account in the first place. Most new accounts have no more than $5,000 (USD) or �5,000 (GBP) placed in them - sometimes considerably less.

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Financial spread betting and types of bets

So you've done your research, and found a company that you want to place a financial spread bet on. But one of the problems with any form of equity investment, be it through share ownership or via financial spread betting FTSE stocks, is the risk that the market as a whole, or the sector in which your chosen company operates in, goes down. Is there any way around this, and can we look at a 'market neutral strategy' for trading?

Happily, the answer is yes, if you use spread betting. There is a way to remove or at least minimise that kind of risk, and it's called 'Pairs Trading'. This takes advantage of one spread betting's general advantages, being that you can bet on things going down as easily as you can bet on things going up. This luxury isn't available to most traders of equities. Of course, there is a bit more work than simply picking a winner here because - as the name implies - you pick a pair of trades to construct your position. Here's how it works.

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