The ability to profit when markets fall can be a powerful addition to a trader’s toolkit. That’s why understanding how to short a stock – also known as short selling – is essential for anyone looking to trade more dynamically. While traditional investing focuses on buying low and selling high, shorting reverses that logic. It carries risk, but when used wisely, it can open up strategic opportunities in declining markets.
This guide will explain what short selling involves, how the process works in practice, and how UK traders can use it responsibly – with practical examples and a clear look at the risks.
Shorting a stock means betting that a company’s share price will fall. It involves borrowing shares from a broker, selling them at the current market price, and then buying them back later at a lower price. If successful, you keep the difference as profit, minus any associated fees.
In simple terms, shorting a stock involves:
If the share price rises instead, you’ll need to repurchase them at a higher price – resulting in a loss.
In the UK, most short positions are executed through Contracts for Difference (CFDs). Choose a regulated broker authorised by the Financial Conduct Authority (FCA) that offers short selling via CFDs or margin trading. Reputable brokers can be compared on our recommended UK platforms guide.
Identify a company you believe is overvalued or vulnerable to negative sentiment. Use a combination of technical and fundamental analysis:
Using your CFD platform, select the option to “sell” or “go short”. You don’t take ownership of the shares – instead, you enter into a contract reflecting the price movement.
Set stop-loss levels and limit your position size. Most platforms offer tools to manage leverage and monitor potential drawdowns.
Track price movement, news, and technical levels. When the stock reaches your profit target or stop–loss threshold, close the position by repurchasing the CFD.
Trading via CFDs gives access to short-selling opportunities, but leverage significantly increases risk:
Ensure you’ve read and understood the risk disclosures from your FCA-regulated broker – including margin requirements, potential for unlimited losses, and automatic liquidation – before initiating a short trade.
Shorting is used for more than just speculation. Investors in the UK may short stocks to:
When managed well, shorting can add flexibility and downside protection to a portfolio.
Imagine a UK tech firm posts disappointing earnings. You expect the share price to fall from 200p to 170p. On your CFD platform, you short 1,000 shares at 200p. The stock drops to 170p, and you buy back the shares to close your position.
Result:
Had the price risen to 230p, your loss would have been £300.
Short selling is not suitable for everyone. Consider these alternatives:
These strategies allow bearish exposure while limiting risk.
Before you short a stock, be aware of these common risks:
Shorting demands strict risk management and emotional control.
It means selling borrowed shares in the hope of buying them back later at a lower price. You profit from the difference – if the price drops.
When you open a short position via a CFD or spread betting platform, your broker arranges the borrowing automatically. You don’t take ownership – you’re speculating on price movement.
No. Short selling isn’t permitted in Stocks & Shares ISAs or SIPPs. These accounts are designed for long-term investing, not leveraged trading.
Safer alternatives include inverse ETFs (which rise when markets fall), bear funds, and put options. These limit potential losses and don’t require margin accounts.
Short selling can be a powerful way to profit during downturns or hedge existing positions. But it requires confidence in your analysis, emotional discipline, and a clear understanding of how leverage and margin work.
If you’re an experienced trader with a solid grasp of risk controls, shorting may be a useful tool. However, if you’re new to markets, consider starting with inverse ETFs or professionally managed bear funds.
The key is to understand not just how to short a stock but when it makes sense and how to do it safely within your broader investment strategy.
Spread betting is an excellent way for bettors and investors to earn from financial instruments without purchasing or owning them. But what is spread betting, and how can you make money from it? Spread betting allows bettors to speculate how the price of an asset moves and profit off of correct predictions. Participants can make considerable profits with no capital gain tax on their earnings.
In a recent survey in Britain, less than 1% of the respondents (0.3%) participated in spread betting in 2023. The same figure was recorded in 2022, showing no decrease or increase in spread bettors. If you want to hop on the spread betting bandwagon, here’s everything you need to know before taking the plunge.
Spread betting involves betting on the price movements of financial instruments like indices, options, and stocks. Instead of trading actual assets, spread betting deals with derivatives, which are financial contracts that gain value from their underlying assets.
For instance, instead of buying actual Apple stock, holding it, and selling it if the price climbs, spread bettors bet on Apple stocks increasing in value. They’ll then make money if stock prices rise and lose money if they do the opposite.
Spread betting involves speculating on the direction in which the price of an asset moves. Essentially, it’s making a bet on whether a financial instrument’s price goes up or down. Unlike trading, it doesn’t involve buying or owning the actual asset. Spread bettors make money when the asset’s value moves in the direction they bet. Conversely, they’ll lose money if the asset’s value moves in the opposite direction.
Spread betting is as easy as trading or investing in financial markets. Below is a quick breakdown of how to spread bet successfully.
The first step in spread betting is choosing an appropriate platform to facilitate your bets. There are plenty of UK spread betting companies to choose from, so it’s up to you to explore the available spread betting sites and pick a licensed and reputable trading platform.
While spread betting is mostly speculation, you can adopt certain strategies to make accurate price movement predictions, maximise profits, and minimise losses. Most trading platforms have educational resources where you can learn about these strategies, but you can also research the World Wide Web for the same.
Spread bettors can bet across various markets, including the stock, forex, indices, and options market. Markets move differently, so it’s a good idea to pick a market you’re familiar with. Also, stick to betting on one market and using the same spread betting sites until you’re comfortable enough to diversify.
The stake is the amount of money you want to risk for every point the asset moves. Higher stakes equal higher rewards but also more negative returns if the market doesn’t move in your favour. Beginners should set their stakes lower while learning the ropes to minimise losses. A £20 stake means you’ll gain or lose £20 for every point the asset price moves, depending on your position.
You can either go long (buy) or short (sell) your betting poison. Going long means you expect the price to increase; while going short means you expect it to decrease.
Smart bettors use different risk management tools to cut their losses. Some use stop-loss orders, which automatically close their positions if the asset reaches a specific price. This ensures that losses are capped at that price. Some also use take-profit orders, which close their positions after the asset reaches a particular price, taking the profit they made from the bet at that price point.
With everything in place, you can now place your bet and wait eagerly as the asset price moves in or against your favour. If you’ve done appropriate research on the asset and implemented appropriate risk management strategies, you’re likely to make a profit. However, you’ll likely lose your hard-earned cash if you place your bet on impulse or use emotion and ignore risk management tools.
To understand how spread betting works, you must first understand the key features of spread betting. Spread betting consists of three main features: the spread, the bet size, and the duration. Other elements in spread betting include the direction, leverage and margin. We’ll look at these key elements in detail to further your understanding.
Spread is simply the variation between two prices, rates, or yields. It seems simple enough, but its meaning varies contextually. The spread in stocks is the gap between the buy and sell price. In bonds, it’s the difference in yields between two securities.
All in all, the spread is the disparity between the buying (bid) and selling (ask) price. The spread is also what you’ll pay to open a spread betting position on the market of your choice. It often entails all the necessary costs of opening a position, including trading fees, eliminating the need for commissions and separate charges.
Trading platforms markup the buying and selling price by half the total spread amount. Let’s say the NASDAQ: QQQ has a one-point spread. This means the buying price is half a spread about the actual buying price and the selling price half a point below the selling price.
The best size is how much money you allocate to each trade/bet. The larger the bet size, the more money you’ll make if the bet goes your way and the more you’ll lose should it not.
For instance, if you bet £10 that Tesla stock will go up, you’ll get £10 for every point the stock increases. If it goes up by 4 points, you’ll earn £40, 5 points, £50, and so on. The opposite is also true if the stock plummets. For every point the stock decreases, you lose £10.
Duration is the amount of time your spread betting position remains active. Different platforms have varying spread bet durations, usually lasting anywhere from a day to a few months. Some of the most notable spread bet durations include:
It’s worth noting that bettors can close their bets whenever they wish in both types of spread bets. However, for quarterly bets, the position will close automatically after the end of the third month.
That said, spread betting has other features, such as the direction in which the market moves. Going long in spread betting means buying a position while anticipating its price increase. You’ll make money should the asset’s price increase and lose if it doesn’t. Going short, on the other hand, means opening a bet position and anticipating an asset price decrease. If the asset’s value decreases, you make the correct bet and profit from your bet. The opposite is true if the value goes up.
For instance, let’s say you decide to go long on the price of gold with a bet size of £50, anticipating a bullish trend. After opening your position, the price of gold rises by 3 points. This means you’ve made the correct bet, and the platform will deposit £150 into your account. If you went short, however, you would lose £150.
Margin in spread betting is the deposit you put down to open your position in your preferred financial market. Platforms have different margin requirements, but most will have two types of margins.
Leverage allows spread bettors to open positions with multiple times your Margin amount. With leverage, you can bet multiple times the amount to make more money. However, trading with leverage also means multiplying your losses like your gains.
A platform offering a 1:100 leverage on spread bets will give you 100 times the betting amount you deposit to fund your bets. If you fund your bets with a 10-pound margin, you’ll have £1000 to bet with. £20 will give you £2000 for your spread bets. The only downside to margins is that it also magnifies your losses, and you must use proper risk management strategies to avoid losing too much.
Spread betting involves multiple risks that could lead to losses. These risks include:
The main difference between UK spread betting and traditional investing is that spread betting doesn’t involve actually purchasing the asset. Instead, participants bet on the direction of the asset in question. This also means you don’t own the asset and don’t directly profit from it. Instead, you make money when the asset price moves in the direction of your bet.
Calculating profits and losses in UK spread betting depends on how many points an asset’s value moves. The simple formula for calculating how much you make spread betting is subtracting the closing price from the opening price and multiplying it by the stake you placed per point. You’ll assign positive and negative values on the closing price, depending on whether you went long or short.
You can think of leverage as a loan the platform gives you to increase your margin when opening positions. These platforms usually represent leverage in ratio form like 1:100 or 1:250. For the former, the platform will offer you 100 times your margin amount and 250 times for the latter. The higher the leverage amount, the more profit you get, but also, the more losses you’ll incur if your bet goes wrong.
There are several factors to look for when you want a top-tier spread betting platform. The first and most important factor is the platform’s regulation. Only choose a platform with licenses and regulations from top governing bodies like the FCA, FINRA, and others. Next, you’ll want a platform with a large variety of tradable assets, robust security features, tight spreads, and massive leverage. You should also check out reviews and testimonials online to find the most appropriate platform.
Spread betting is an excellent way to make an honest living or add to your current income, provided you find the right spread betting platform. Now that we’ve answered, “What is spread betting?” it’s up to you to find an appropriate platform and place your bet.
Remember, only bet on a single financial market and understand it fully before diversifying your betting portfolio with another market. Also, betting is just as risky as trading financial assets. Only bet what you’re willing to lose and use appropriate risk management strategies to reduce your losses. With proper research, practice, and risk management, you’ll be set to make a killing with spread betting.
Many UK individuals looking to venture into the cryptocurrency market will think of buying Bitcoin. However, there are thousands of crypto tokens to invest in via a brokerage firm or crypto exchange. Popular options include Ethereum, Litecoin, Ripple, Dogecoin, Cardano, Tether, and more.
Note that the cryptocurrency financial landscape is highly volatile, and digital tokens’ value constantly changes. As a beginner, you must be prepared to conduct extensive market research and analysis before making your purchases. Learn how the cryptocurrency market operates, the risks involved, and tips for getting started. Our comprehensive guide below offers guidance on how to buy crypto in the UK and more.
Cryptocurrency trading is an online-based activity that allows traders to take short-term positions in the cryptocurrency market. While trading, you will buy and sell digital tokens to potentially earn quick profits from the price difference. Here, traders take full ownership of the underlying securities.
Besides buying and selling, you can also trade cryptocurrencies as derivatives, whereby you do not take ownership of the underlying asset. For instance, CFD trading allows crypto traders in the UK to speculate on digital tokens’ price movements and benefit* from the price difference. With CFD cryptocurrency trading, you can predict the value of a token’s rising or falling price (going long or short).
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.
It is crucial to understand that cryptocurrencies run on decentralised systems and do not rely on government or central banks’ regulations. They operate on a peer-to-peer system called blockchain and transactions are solely conducted online.
Crypto trading UK requires a broker or exchange listing your preferred tokens. With many providers in the market, ensure you select those that are regulated by the Financial Conduct Authority (FCA) to avoid falling victim to scammers. With brokers or exchanges, you can trade cryptos as derivatives (CFD) or make purchases to benefit* from the price difference in the future. UK clients can also spread bet on cryptos, thus avoiding the tax implications attached.
The best element about the CFD trading method is that you can leverage your assets by opening a position with a fraction of a trade’s full value. Also known as margin trading, it maximises your chances of earning huge profits should a trade work out in your favour. But remember, you can also earn massive losses with the wrong approach and strategy.
That being said, crypto trading UK is highly risky because of margin trading, which can result in losses if a trade goes against you. Therefore, ensure you can thoroughly analyse the crypto markets and develop solid strategies for maximum potential. And if you make purchases, secure your tokens on a digital wallet and do not share your private keys with anyone. Digital wallet storages has proven more secure than leaving your tokens on an exchange. This is especially if you are investing long-term.
Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.
Trading cryptocurrency requires a strategic approach and solid strategies. You must first understand how the crypto market works, including factors affecting the tokens’ value. Take advantage of your broker’s learning resources, including guides, articles, webinars, eBooks, and more and ensure you are familiar with what you are about to get into.
Additionally, be willing to conduct a thorough market analysis to identify suitable entry and exit points that will maximise your chances of success. Then, follow our steps below on how to invest in cryptocurrency UK to get started on a good note.
You first need to visit your cryptocurrency broker’s website to set up a trading account. As mentioned earlier, ensure the broker is FCA-regulated to trade securely. Once on the site, do not rush to create an account. Instead, read the terms of service to ensure you are on the same page and avoid future inconveniences. And of you are always on the move, consider installing your broker’s trading app on your Android or iOS mobile device to efficiently manage your positions even when away from your trading station.
On your broker’s website, click the “register,” “sign up”, or “join now” button to start creating an account. For most FCA-regulated brokers, you will be provided with a form to fill out using your personal details. They include your name, email, phone number, date of birth, source of income, and more. And to further secure your trading account, ensure you create a unique username and password.
It is a standard protocol for all FCA-regulated brokers to verify their clients’ details before fully activating their accounts. This procedure helps to secure the online trading platform from imposters. In this regard, you will be asked to share a copy of your ID card for identity verification. Other brokers will also ask that you provide proof of residence, which in most cases is a copy of your recent utility bill or bank statement. Depending on the broker, the verification process may take up to 48 hours. You will receive an email notification once everything is all set.
Proceed to fund your cryptocurrency account using a convenient payment method supported by your broker. Fortunately, most UK FCA-regulated brokers allow transactions using multiple methods, including credit/debit cards, e-wallets, and bank transfers. Consider the transaction costs applicable to ensure you trade under budget.
Once your deposit is confirmed, you will be redirected to your broker’s dashboard, where cryptocurrencies are listed. Choose your preferred tokens and trade size, and stick to your budget. You must also consider applying risk management controls like stop-loss and take-profit orders to mitigate massive losses in case a trade works against you.
If you are buying a cryptocurrency and taking ownership, ensure you secure your tokens on a legit digital token. Most importantly, stay abreast of the developing market trends so you can identify the best time to make a move.
Read about the best practices for secure trading in our other guide.
Like any other venture, cryptocurrency trading comes with risks you must understand in order to make the best decisions. Common risks in this market include:
Yes. Ever since cryptocurrencies were introduced in the market, the UK has supported its purchases. However, individuals engaging in this investment must be of legal age (18+ years). You will also need a cryptocurrency brokerage firm or exchange regulated by the FCA to securely buy crypto UK.
Note that cryptocurrency investment in the UK carries risks, and you should be prepared to lose your money. These could be due to various reasons, including constant price changes, failure of a broker to securely segregate your funds, and cyber attacks.
Remember, unlike other securities like stocks and forex, cryptocurrencies in the UK are not regulated. This means that in case you lose your funds, you will not be covered by the Financial Services Compensation Scheme. The good news is that we have witnessed many UK traders and investors earn good profits from the activity. All you have to do is conduct thorough market research, develop solid strategies and avoid making decisions based on emotions to increase your chances of success.
Buying cryptocurrencies in the UK has enabled individuals to invest their funds online in the comfort of their homes. As professionals with decades of experience in this field, we confess that buying cryptos comes with numerous advantages compared disadvantages, including:
The best cryptocurrencies are those that are already popular and known among global traders. Bitcoin and Ethereum are good examples of the best crypto investment options for newbies. These tokens are widespread, have high liquidity, and have a proven track record of success. However, with many crypto tokens in the financial space, the best for you depends on your personal preference and investment goals. Simply invest in a token you are fully familiar with.
There are many online resources to learn about cryptocurrencies before venturing into this volatile market. Besides InvestingGuide guides, you can take advantage of brokers’ and exchanges’ resources, including articles, guides, videos, webinars, and more. There are also other online resources like podcasts and YouTube channels. Remember, the cryptocurrency market is evolving with technology. Therefore, never stop learning so you can be fully informed about the latest developments and make informed decisions.
Absolutely. Making the decision to trade cryptocurrencies can be one of the best. The activity is lucrative, and we have seen many traders earn good profits out of it. However, note that success doesn’t come overnight. It needs hard work, discipline, and patience. Therefore, always conduct a thorough market analysis, understand the risks that come with this investment, and develop solid strategies. This will enable you to identify entry and exit points that will increase your chances of success.
Yes. Although it is a risky decision and move to make, cryptocurrency trading can be your primary source of income. We advise you to approach the activity cautiously, considering the market volatility. Only open a position when you are confident in your strategy and not based on emotions. Understand that there is always no guarantee of profit when it comes to cryptocurrency trading.
Buying cryptocurrencies in the UK requires a solid understanding of the market, including all the terminologies, the technology involved, how/why prices fluctuate, and more. Our guide on how to buy cryptocurrency UK above has introduced you to the cryptocurrency space, so we hope you are confident in kickstarting your ventures. Never stop learning about the crypto market, considering that it keeps evolving. Take advantage of brokers’ and other online learning resources to stay breast about the latest developments. And when you are ready to make your first investment, start with a small capital that you are comfortable losing in case things do not work out in your favour. Moreover, utilise risk management controls like stop-loss orders to mitigate massive losses.
When you mention investing in the UK, many individuals think of running various businesses like real estate or service offerings. However, there is more to investing, and stock purchases are becoming more prevalent. You might be sceptical about putting your money in stocks as there is no profit guarantee. But like any other venture, you must be strategic and have a solid plan to maximise your profit potential.
Today, we walk you through ways of buying stocks in the UK. If you are a beginner, we will start by explaining what stock trading or investment is and how to buy stocks UK. Overall, this guide sheds light on everything about stock trading so you can decide whether it is an activity worth venturing into.
Stock trading involves buying and selling a company’s stock to profit in the future due to price fluctuation. With stock trading, you can capitalise on short-term and long-term market events depending on your investment goals. For instance, you can buy XYZ company stocks at a specific price, hoping that the value will increase over time. This is so you can earn profits.
You can buy stocks UK as shares or equities and enjoy various benefits, including being a shareholder. Depending on the company, purchasing stocks allows you to earn annual dividends of the company’s profits.
Individuals venturing into stock trading require a credible and reliable stock broker. While you can purchase stocks directly from an exchange, the procedures involved are complex.
The best element about using a stock broker to trade this asset is that you can manage a portfolio with multiple company stocks on a single platform. Simply ensure the broker you use is licensed and regulated by the Financial Conduct Authority (FCA). And if you want to invest in stocks UK and take full ownership, your broker should have access to the exchanges that list them. These include the London Stock Exchange (LSE), NYSE, NASDAQ, and more.
Any trader or investor can venture into stock trading in the UK. You can trade the asset in various ways besides purchasing. These include trading stock as CFDs, whereby you speculate on the price movement of a company stock to benefit from the price difference.
Alternatively, stocks can be traded as indices. With this method, you will invest in a bucket of various stocks and get exposure to an entire sector or economy at once. You can also trade stocks as spread betting to avoid tax implications that apply in the UK market.
Overall, stock trading can be profitable if you apply the best strategies. Fortunately, most FCA-regulated stock brokers in the UK host quality market analysis tools to aid in strategy development.
Remember, the stock market is volatile, and prices do not always remain constant. Since you risk losing money, start your ventures with a small capital you are comfortable losing if a trade works out against you. Furthermore, utilise brokers’ demo accounts to practise stock trading and gauge your skill level before transitioning to live trading. Do not venture into stocks based on emotions, but stick to your strategy. Simply put, only trade when you identify the best entry and exit points.
Many traders, especially newbies, are sceptical about taking the first step of selecting the best stock broker and creating trading accounts. The majority believe that the procedures involved can be complex, which, in our opinion, is not valid.
As mentioned earlier, trading with a stock broker offers you many more opportunities than without one. For instance, you have a platform that guarantees maximum safety and is highly encrypted to avoid unauthorised access. Plus, you can diversify your portfolio across other asset classes, including forex, commodities, cryptocurrencies, ETFs, and more.
That being said, here is our step-by-step guidance on how to start trading stocks UK.
Before you start stock trading, take advantage of your broker’s and other online platforms’ learning resources. These include articles, guides, eBooks, videos, webinars, seminars, and more. Learn everything about the stock market and all the elements influencing the prices. You can take advantage of brokers’ demo accounts to gauge your skill level and make a decision on whether you are ready to invest real money in the stock market.
Once you are confident in your stock trading skills, choose a stock broker that suits your skill level. Since the UK financial space hosts both legitimate and fraudulent brokers, ensure you do not fall victim to scammers. Consider stock brokers that are licensed and regulated by top-tier authorities like the UK’s Financial Conduct Authority (FCA). Plus, your broker should suit your trading requirements, including budget, simplified use, hosting your preferred stocks and other assets, mobile compatibility, and more.
With your chosen stock broker, create a trading account by clicking on the “register,” “join now,” or “sign up” button. Then, fill out the provided form with your personal details, including your name, email, phone number, date of birth, and more. And, do not forget to create a unique username and strong password for added safety to your account. Some brokers may also engage you in a questionnaire to gauge your skill level and recommend the best leverage limit.
If you have chosen an FCA-regulated stock broker, you will be required to verify your personal details. During this process, you will provide a copy of your government-issued or national ID card, passport, or driver’s licence to verify your identity. And to avoid hosting imposters, your broker will also request you to share a copy of your utility bill or bank statement as proof of residence. Depending on the broker, the verification process may take hours to days. Your broker will send an email notification once your account is fully activated.
At this point, proceed to deposit funds into your stock trading account by considering your broker’s minimum deposit requirement. Note that most FCA-regulated brokers support transactions using multiple methods. These include debit/credit cards, e-wallets, and bank transfers. You must also be familiar with deposit charges, if any, so you can plan accordingly.
Your deposit will automatically be confirmed, after which you will be redirected to your broker’s list of stocks. Choose the stocks you are familiar with and confident in, and select how you want to trade them. You can buy the stocks and take ownership or trade them as derivatives, whereby you only speculate on the assets’ falling or rising prices.
Pick a stock trading strategy based on your skill level, whether day trading, scalping, swing trading, or more. Do not forget to utilise risk management controls like stop-loss and take-profit orders since profits in stock trading are not guaranteed. As mentioned earlier, avoid emotional trading and only open a position once you identify the best entry and exit points. Most importantly, track your positions using your broker’s trading app if you are always on the move.
Every business venture carries risks, and stock trading is no exception. This market is volatile, and various company stock share prices fluctuate due to various factors. These include economic factors, political factors, and social events. To manage this risk and increase your chances of success, ensure you conduct a thorough market analysis and stay updated about the latest developments in the stock market. This way, you will develop solid strategies and know the best time to make a move.
There is also a liquidity risk in the stock market. Some stocks are difficult to sell without affecting their value. So, ensure you choose stocks that will be easy to sell off when the right time comes. And for traders who prefer margin trading, understand that it comes with risks of losing a lot of money. Therefore, before applying leverage in a trade, be confident in your strategies and only trade with funds you can afford to lose.
Buying stocks can bring about good profits, but like other investments, it comes with pros and cons. As a trader, understanding these advantages and pitfalls will help you make the best investment decisions.
UK individuals can start stock trading with as little as £50. Some brokers do not have a minimum deposit requirement, thus enabling you to deposit any amount of money you can afford. You can buy fractional shares or trade them as derivatives, including CFDs and indices.
Stock traders earn money from the profits made in this investment. When you open a position in the stock market, you predict that the value of a company’s stocks will rise or fall. As a result, you will profit from the price difference should your prediction work out in your favour. Traders who buy stocks and take ownership can also earn dividends from the companies in which they invest.
Absolutely. Stock trading is easy with proper planning and strategy development. If you are a beginner, start by learning how the stock market works. Also, choose a credible stock broker with access to exchanges that list your preferred stocks. You can learn more about stock trading using online guides, articles, eBooks, webinars, and more. Then, gauge your skill level on your broker’s demo account before transitioning to live trading.
From our experience, the best stocks for beginners are those that are already established, have financial security, and have a long track record of solid performance. While most such stocks are expensive, online brokers allow you to buy them in fractions.
Trading stocks in the UK has brought many opportunities. Before diving into this venture, start by educating yourself about the market’s performance. Plus, set clear goals on whether you are looking for long-term or short-term growth. This will guide your investment choices, and you will be able to develop strategies that increase your chances of success.
Most importantly, diversify your portfolio across various instruments, considering that the stock market can be unpredictable. You want to avoid the impact of a downturn in one area of the market. By remaining disciplined, patient, and learning from your losses, your efforts will soon pay off, and you will begin to enjoy the fruits of your labour.
The UK has a deep-rooted history with bond markets. The relationship dates back to 1694, when it incorporated its central bank, the Bank of England, specifically to raise funds for England’s war effort against France.
But bonds didn’t start here. They are among the oldest financial instruments used by governments, corporations, and individuals. Throughout history, bonds have contributed to economic growth and financial crises.
Bonds began in Venice in the 1100s, funding wars and public works. Later, they evolved into negotiable instruments traded assets by City-states and monarchies. The Rothschilds traded European government bonds in the 18th and 19th centuries. Bonds funded colonial expansion and the transatlantic slave trade. During the Industrial Revolution, mega projects like canals and railroads were all backed by bonds, which contributed to economic development and urbanisation. The global bond market is worth over £100 trillion today, according to the Securities Industry and Financial Markets Association’s records.
If you intend to learn how to invest in bonds UK and learn how they work today, here is a detailed look at everything there is about them.
A bond is a loan you give to a public or private institution in exchange for regular interest payments and a refund on a set future date.
Bonds are like regular loans but with a critical difference: once issued, you can trade them with other investors in the financial market. Essentially, a bond has a market price.
Typically, the borrower who issues the bond is called the “Issuer,” while the lender is known as the “Holder.” The issuers are corporations or governments, while the holders are individuals or institutions, e.g., banks. So, in government bonds, the borrower is the government, while in corporate bonds, the borrower is a company.
When talking about bonds in the UK, we must mention Gilts. A gilt is a government-backed bond denominated in pounds, issued by His Majesty Treasury, and listed on the London Stock Exchange. So, when you buy a gilt, you lend to the UK government in return for periodic interest. They repay you the amount you lent them back at the end of the agreed term.
The term “gilt” means something resembling gold; indeed, bonds, like gold, are safe investments. Their safety as an investment makes them so popular with investors. Besides the low risk, you should consider investing in them for two other reasons:
Besides Gilts and Corporate bonds, we also have municipal bonds issued by local authorities. But they are less common in the UK than in some countries.
Another variant is investment-grade bonds. These have a higher credit rating and a lower risk of default.
Finally, as the name suggests, we have high-yield or junk bonds offering higher yields. Nonetheless, they are more risky because of their low credit ratings.
Bonds can be low-risk or high-risk, conventional with a fixed interest rate or index-linked. Inflation rates significantly affect their pricing. Those issued by companies raising capital carry a higher risk than gilts but offer higher yields.
Bonds are sold to investors through brokers or investment houses when issued. However, you can buy gilts directly from the UK Government Debt Management Office (DMO). In return for buying the bond, investors receive coupon payments. The interest comes in once or twice a year, depending on the bond type. Upon maturity, the bondholder gets back the face value, or par value, unless there’s a default.
Bonds can have varying maturity dates, categorised as short-term, medium-term, or long-term. But you don’t have to hold a bond till its maturity. You can trade them on trading platforms, with their market price sometimes different from their face value. So, you can buy from another investor or sell your holdings before maturity. Let’s look at how they work.
When borrowers issue a bond, they determine the face value, also known as the par value or redemption value, which is printed on the bond. This amount represents what the issuer commits to repay at maturity. The bond also specifies the coupon rate or yield and the maturity date. The coupon rate is the interest rate paid annually or semi-annually based on the bond’s face value.
As the investor lending the money, this face value is the loan principal, while the interest rate is your investment’s rate of return.
Here is how a bond lists in the market: ‘3% Treasury stock 2030’.
In this example, ‘Treasury stock’ declares the issuer to be the UK government. On the other hand, 3% is the bond yield or coupon rate, usually paid in half-year instalments.
Suppose the bond’s face value is £100. The bond earns £3 annually or £1.50 half-annually. If this bond trades in the secondary market, it can trade for more or less than that value. If you buy it for less than £100, you may hold it to receive interest payments and perhaps hang on until 2030, the redemption date. The bondholder gets their premium back on the redemption date.
The coupon rate reflects the bond’s comparative security. Generally, riskier bonds have a higher coupon, while safer ones have a low yield rate.
You can opt out of a bond by trading it on the secondary market, just as we trade stocks and shares. However, the bond can be traded at a premium or discount based on its face value. So, the bond’s face value differs from its price in the trading market. The critical difference is that the face value remains constant until the bond reaches maturity, while the price is subject to market factors. This price fluctuates based on the issuer’s creditworthiness, economic conditions and interest rates.
Also, if this price moves in the opposite direction to the bond’s yield. When the price rises, the bond’s yield will fall—and when the price falls, the yield rises.
The bond market depends on the central bank’s official interest rate, which is the base for the rates offered by banks and building societies. When interest rates shoot, bond prices usually fall, and yields go up, and the reserve is true. Investors often seek a specific return, and the general interest rate influences their choices.
When interest rates rise, investors’ required rate of return also rises. They may prefer newer bonds with higher yields and pay less for existing bonds. So, they’ll rush to sell the existing bonds and push down bond prices. If the interest rate falls, investors would be ready to pay more for these fixed-rate bonds, pushing the demand up, and hence, the bond prices may rise.
If you’ve decided to trade bonds, here is how to do it in a few steps:
You can decide to buy the bonds directly or speculate with derivatives. For gilts, you can buy them directly from the government or through trading platforms. But if you decide to speculate, you can invest indirectly through CFDs or own shares in a bond ETF.
Many trading platforms offer CFDs on bonds by the world’s leading economies. Pick your favourite broker; our broker finder can help you. Afterwards, create your account and deposit funds using your preferred payment method.
Trading platforms list government and corporate bonds and their prices, coupons, and maturity dates to help inform your decisions. Since you have everything ready, select the bond offering from the list. You can pick a gilt bond, futures contract, or corporate bonds from within your trading platform.
You can choose to:
Taking a short position on a government bond can hedge against downturns in the real income from shares and bonds you own. Inflation is an increase in the aggregate price level, measured by changes to a price index like the CPI. High inflation reduces the real value of dividends from shares and fixed coupons from bonds, lowering their purchasing power. This decreases market demand and prices for these assets. By shorting the bond market, you can profit from the decrease in bond prices, offsetting some real income losses. However, hedging carries significant risk, especially when using leveraged derivatives like CFDs, as you can lose more than the margin you deposited. Losses could be unlimited if bond prices rise.
Bonds are less desirable when interest rates rise, so their prices drop. If you expect this, adopt a ‘short’ position on government bond futures. You ‘sell’ a derivative to open your trade and ‘buy’ it back to close it. You profit if you sell for more than you buy but incur a loss if the opposite happens. Short selling is a high risk because bond prices can rise indefinitely, leading to unlimited losses. Attaching stops to your positions can cap your loss.
Like in share trading, you must consistently monitor and manage your bond holdings. Pick your bond trading or investing strategy, some of which include:
Bonds are safer than shares, but no investment is guaranteed. While bond issuers promise to pay coupons and repay the principal at maturity, losses can still occur. Key risks include:
When a company issues bonds, it often hires an investment bank to ‘underwrite’ the process. This means the bank buys the bonds from the company at a fixed price and sells them to big institutions or funds. Buying corporate bonds directly from institutional broker-dealers usually requires a large minimum investment, which can be costly for retail investors. However, you can still invest in bonds by owning the underlying asset. When trading bonds, you take a ‘buy’ position if you expect the bond’s value to rise or a ‘sell’ position if you expect it to fall. You can invest through share dealing or trade using spread bets and CFDs. Whether you pick a bond or a bond ETF, effectively managing your risk is essential.
In the UK, you gilts in three ways:
These are debt securities governments issue to raise funds.
These are debt securities issued by businesses to raise capital.
Yes, it can be worthwhile for investors seeking stable income and relatively low-risk investments. Gilts are generally considered safer than corporate bonds due to the backing of the UK government, although returns may be lower.
In the UK, you pay Capital Gains Tax (CGT) on profits when selling bonds for more than you bought them and Income Tax on interest income earned from bonds.
Corporate and government-backed bonds are among the world’s most traded financial assets. They offer steady returns, making them valuable in uncertain times. Adding bonds to your investment portfolio can enhance economic stability. Online trading platforms have made accessing these investments easier. Choose one of our listed brokers to start trading bonds and improve your financial well-being today.
Company shares or stocks are the most popular security in the United Kingdom. According to a Statista report, almost a third of UK investors have company shares. Shares ranked second in popularity in the report. But this is not something new. Since the late 1400s, first in Antwerp or modern-day Belgium, people have been trading stocks to net them a profit. You, too, can do it. So, it’s no surprise that you want to learn how to buy shares. Today, we tell you how to join millions of others in trading shares.
Before we define share trading, what’s a share in trading?
As it means in English, a share is a part or portion of something.
It is a security sold on the stock exchange, giving you a stake in the company.
We usually use the terms “shares” and “stocks” interchangeably, but they don’t always mean the same thing. A “share” represents an ownership unit in a single company, while “stock” refers to shares collectively and can include one or more companies. So, owning 100 shares means you have 100 shares of a specific company, but owning 100 stocks means you have shares of 100 different companies.
Once you buy a share, you become a partial owner (shareholder). You are entitled to benefit from the company’s growth. You could vote on company decisions and receive dividend payments.
But, there are different types of shares, including ordinary and preferential. Ordinary shares are the most common and standard type, with neither special rights nor restrictions. Preferential shares get first treatment in dividend payments but are not entitled to vote.
And with that, we can now define share trading.
It is the buying and selling of company shares, anticipating the price to rise or fall to make a profit.
Read about the Technology and Innovation in Trading in our other article.
The overall objective of engaging in share trading is to make money. So, you buy low and sell high. The activities happen in the share market, also called the stock market or stock exchange.
But what’s a stock exchange? It’s where buyers meet sellers willing to trade their assets. The exchange market lists publicly traded companies together with other financial securities.
Companies raise capital to fund expansion or new projects through the exchange by selling shares of their company to interested parties. Private firms wishing to join the stock market go public through an initial public offering (IPO). Already-listed firms can often raise more capital through secondary offerings.
Before listing, the private company works with underwriters or a book-runner to decide the IPO price. The underwriters consider the following in determining the IPO price:
Once a company becomes public, its share price is driven by supply and demand. However, the company’s performance dictates the demand for its stock. More people want a piece of the company if it’s performing well and its earnings grow.
Other factors that determine the share price include:
Today, the share trading market could be physical or digital. But whether at the brick-and-mortar or digital venue, the exchange happens electronically.
You cannot engage in the market directly, so you need the help of a licensed broker to trade. Your work is to pick the share you intend to buy and submit your order. You do this through traditional brokerage firms like banks and financial institutions. But today, the best and most popular way of buying shares is through an online broker or trading platform. In fact, the UK’s financial regulator, the Financial Conduct Authority, says that almost 10% of UK adults use these platforms.
The online trading platforms offer direct-to-consumer, or ‘DIY’, services where you do most things yourself. However, picking a regulated broker with minimal fees is advisable. Our innovative broker finder helps you with that. It compares the best UK brokers feature by feature and even suggests the best option.
As a shareholder, you’ll earn capital gains if you sell the shares higher than you bought them. You can also buy more shares of the company. But there’s trouble if the company is not performing well; you could sell the shares lower than you bought them.
When you trade online, your broker allows you to use different trading tools to execute your trades. The most common tools are orders, which include:
Limit Order
You decide the price at which you’ll sell or buy the stock. The order helps you take advantage of market trends. If the price of a stock is falling, you set the lowest price you’ll buy the stock. And if its price is rising, you’ll decide how much to sell it. It also helps you limit loss or protect your accumulated gains.
Stop-loss Order
This order is specific to preventing losses. You predetermine the price to sell the stock when its price is falling.
Since you now have the basics of shares and trading, let’s look at the step-by-step guide on how to buy or sell shares in the UK.
At this point, we assume you have used our broker finder to pick the best stock broker in the UK. Opening your account is easy, quick and convenient. All you must do is fill out the online registration form requiring personal data. You’ll also provide National Insurance and your bank account details. Afterward, you may need to give more support documents to verify your identity.
Adding funds to your account requires you to choose a payment option you are comfortable to use. It could be an electronic wallet like Skrill or a debit card. You need enough money to buy at least a share. But some stocks are costly. Therefore, some brokers offer fractional stakes that allow you to buy less than one share. Please note that brokers and even payment methods have minimum deposit requirements. But you can deposit as little as £50.
Once you deposit your funds, you can pick your trading. To start, research and identify the shares you want to buy. Companies are listed in the stock on the London Stock Exchange using their tickers. But you can find them with their names as well. The market opens from 8 am to 4.30 pm on weekdays. But online trading allows you to trade even the stocks listed on other exchanges, like the US’s NASDAQ and New York Stock Exchange (NYSE).
When the market opens, you get live quotes and can accept or let them lapse. You always decide the number of shares to buy or the value of the investment.
Once that broker has executed your trades, the app allows you to review their performance. The app lets you see, monitor and review your stocks’ performance in real time. In case you have also held some stocks, any fund funds you receive as dividends reflect as cash in your portfolio. You can create an order to automatically reinvest them or use them to buy shares of other companies.
As you create your portfolio, ensure it is well-diversified, which is the key to mitigating risk. A diversified portfolio means you have spread your portfolio across different industries. You could balance your portfolio in the following lines:
When you spread your portfolio across different sectors and asset classes, you protect your investment against risks. If one company or sector performs poorly, the others may offset the losses.
You can add more funds, buy more shares, or sell those you have and other companies. Just as you get live quotes when buying, so do you when selling. But you can always let it lapse or accept it. After the sale, the broker credits the proceeds, minus the fees, into your trading account.
As we stated earlier, your primary goal is to profit from trading. You can either reinvest the profits or bank them. But that’s only possible if you withdraw them. You’ll go to your broker cashier section to withdraw funds and choose your withdrawal method. Some brokers insist you use the same method you funded your account. But since credit cards are not linked to your bank account, you can’t use them as a withdrawal option. Some available withdrawal options in the UK include Skrill, Neteller, Bank Wire, and Debit Cards.
If you wish to continue trading, the procedure is the same: deposit funds, pick your trades, manage your portfolio, and draw or reinvest your profits.
Investing in the stock market is suitable for beginners but comes with risks. However, risk and investment are inseparable. The decision is only whether the risk is worth it or not. The problem is how beginners deal with it and how to identify low and high risk.
The stock market is highly volatile, and its stability is influenced by numerous factors. Share prices can plummet or crash, leading to substantial losses within minutes. A thorough understanding of share trading and the stock market mechanics can help you develop strategies to handle different market situations.
In trading shares, share prices should reflect the underlying prospects of the businesses they represent. You don’t buy shares because others are buying them, for political reasons, or due to speculation driven by social media. Your decision should be based on the fundamentals of the company. You might not always get it right, but you could minimise the risk.
As stated earlier, you buy shares in the stock exchange but can’t buy or trade directly. Individuals don’t have such direct access; only brokerage firms place orders and execute deals.
So, you need a stockbroker to buy shares. It’s not only for online trading; even if you choose to go over the counter, you still need an account with a registered stockbroker.
Stockbrokers use high-performing technologies for online trades, enabling traders and investors exposure to various stocks at a fee. Often, you can invest with as little as £5.
You can learn trading in the UK by taking online courses, reading books on trading, following the financial news, and practising with a demo account. What’s more, you can read blocks and trading and investing websites.
Yes, but it involves risks, and your success requires the commitment to learning and developing trading strategies and risk management tactics.
Yes, trading shares is legal in the UK, and the Financial Conduct Authority regulates it.
You pay Capital Gains Tax (CGT) and Stamp Duty Reserve Tax (SDRT) on purchases over £1,000. It’s advisable to consult a tax consultant for more specific and personalised details.
You can start with as little as £100, but a larger amount can provide more flexibility and opportunities.
Buying shares in the UK and anywhere else in the world is quick and easy. In fact, share trading is now a common practice worldwide. However, the share market has a degree of risk, so beginners must carefully consider the range of risks any stock presents. If you learn and understand the market, avoid rushing decisions, and have proper timing, you can benefit from the market and achieve your financial goals. So, are you ready to buy shares in the UK? Use one of our expertly reviewed listed brokers and get started.
Traders use options trading to speculate on the prices of financial instruments. The technique, first used in ancient Greece, has never been old. Back then, merchants could use “halters” to lock in a price for olive and wine in production. Doing so enabled them to hedge against future price increments. The halters were enforceable contracts written on papyrus. But that was in the 17th century. Over time, this concept evolved and developed into the options trading we know today. It continues to be integral in finance, with traders worldwide using it.
But enough of history, what is it, how does it work, and how can a beginner like you buy and exploit it in the UK? Of course, there are a few terminologies you need a solid grasp of before we can walk you through them. It’s a maze, and knowing them lets you understand the whole concept.
Options trading involves buying and selling agreements that set the future prices of assets. However, the contract doesn’t obligate the holder to buy or sell, regardless of the type of options they hold.
You have two types of options: the call and put options. Holding the ‘Call Options’ gives you the right but not compelled to buy the asset at the predetermined price. On the other hand, if you have the ‘Put Options’, you are assigned the right with no obligation to sell the asset at the predetermined price.
In other words, options allow you to speculate on the direction of an underlying asset. It will enable you to control a large position with just a fraction of the price.
On exchanges, options contracts are standard with terms set by the exchange, including:
Once you buy the option, we say it is ‘in-the-money’ if your price movement prediction is correct. That’s to say, for a call option, the stock price has surpassed the strike price, or the price is below it for a put option. However, it’s ‘out-of-the-money’ if it has no intrinsic value. Since the assets are time-bound, their value reduces as they approach expiry. The rate at which this happens is ‘Time decay.’ Another common term is ‘Implied volatility’, which measures the market’s expectations for future price fluctuations, with higher volatility leading to more expensive options.
Read about the best options trading platforms UK in our other guide.
To understand what options trading is and the concepts of how it works, take this example:
Imagine you have bitcoins worth £5,000 and believe the digital currency will be worth much more. Your friend wants the right to buy your crypto holdings but is not yet ready to commit. So, he offers you a payment today, say, £500, for the right to buy your holdings at a set price of £6,000 any time within the next three months.
The £500 your friend paid is the ‘premium,’ and the agreement you and your friend created is a ‘call option.’
If the bitcoin price rises even higher than £6,000, your friend can exercise his right to buy your holdings for the £6,000 you agreed. He will benefit from the lower price. However, if the price drops or doesn’t significantly rise as he expected, he can choose not to buy the crypto. But you’ll retain the £500.
Still on your £5,000 holdings, suppose you wish to sell them in the future but are worried the price will drop. You can pay the person you intend to sell the cryptos to a premium for the right to sell them at, say, £4,950. If the price falls under £4,950, you can exercise your right and sell the spices at the higher agreed price. But if the price remains stable or rises, you can let the option expire, losing only the premium paid.
But this is just a hypothetical example, but it happens in the exchange market. If you believe a stock’s price will increase next month, you can buy call options instead of the stock itself. These options have a specific price and date when they expire. If the stock goes up like you thought it would, you can profit, even if you never bought it.
Simply put, options are more like insurance. As a buyer, the Call Option gives you the right to buy but not the obligation to do so. And if you are a seller, the Put Option gives you the right to sell but not the obligation to. If things go your way, you can exercise the option and benefit. If not, you limit your loss to the premium you paid. That drives the point home.
Options trading could be a good option, but you should take it easy, as risks are involved. Below are some step-by-step guides to help you get started.
Options are riskier than stocks as they have complexities that stocks do not. Before trading options in the UK, learn what you want to trade and when to apply different strategies. Take options trading courses and review contract details thoroughly. Missing an expiry date, choosing the wrong options, or not understanding the risks can be costly. You must understand the market trends, preempt future movements using the indicators, interpret data, and understand volatility. All that requires you to check your financial position and risk tolerance and understand the volatility of options.
Since options are traded in the exchange market, you can’t trade them directly. You need a broker to do that. You must first pick a brokerage platform that fits your specific needs. Look for one that offers options trading services and consider these essential factors:
In options trading, you access various asset classes, including Foreign Exchange (Forex), Stock Indices, Individual Stocks, and Commodities. For Forex, you can trade major currency pairs like USD/GBP, EUR/USD, and JPY/USD and exotic pairs such as EUR/MXN or TRY/JPY. For stocks, you can trade based on the performance of major indices like the FTSE 100 in the UK, the S&P 500 in the US, and the DAX in Germany, as well as individual stocks. Commodities include essential goods like oil and iron ore (hard commodities) and agricultural products like wheat and soybeans (soft commodities), vital in everyday life.
Most broker trading apps let you set these rules and automatically implement them. They include:
We don’t talk about investment without mentioning risk; the bar is a notch higher for options trading. When you trade options, you put your capital at risk, and unlike many more straightforward instruments, options are particularly complex. Many options on stock indices expire worthless. But don’t falter at the mercy of opportunity. With risk management and asset management techniques, you can make money.
First and foremost, diversify your portfolio. Aren’t we told never to put all our eggs in the same basket? It helps you spread the risk across different assets and industries. Even so, invest based on your ability and risk tolerance. Don’t put a significant amount in line that you might regret losing.
You can also utilise risk-reduction tools like the take profit and stop-loss orders. These tools are at your disposal as a broker trading feature. They help you protect the profit and limit potential losses by selling your option if it hits a set price. You can use leverage, but avoid overleveraging, as it can magnify losses, especially for beginners.
Also, being informed of what’s happening and events that affect your trades goes a long way toward rewarding you. If a company makes a product announcement, chances are the market will be excited about it. So, the price could shoot, positioning you for profit. But bad news could spell doom for your position.
Before you get deep into this, you can always open a demo account and learn the tricks. Most brokers offer up to 10,000 virtual funds to help you hone your skills risk-free. The demo trading account is modern-day paper trading to gain experience.
Remember, you trade to better your financial position, which can’t happen if you lose capital. Successful options trading is about preserving your capital as much as maximising gains. With sound risk management practices, you will successfully walk through the market.
You can trade options in the UK through several platforms, including online brokerage firms and trading apps such as eToro or CMC Markets, which provide these trading features. The London Stock Exchange (LSE) also facilitates options trading, accessible through brokers offering LSE trading. Financial advisors and investment firms in the UK can also offer options trading services, providing expert guidance and trade management.
Implied volatility measures the market’s expectations for future price fluctuations of the underlying asset.
You can exercise American options anytime before expiration; that can only happen at expiration for European options.
You can start trading options with $100, but your trade choices and potential strategies will be limited.
Yes, options are considered high-risk investments due to their leverage and potential for significant price volatility.
Options trading puts your money to work in the market with distinct risk and reward profiles. While stocks offer high-risk, high-reward potential, options amplify this, with the possibility to double or triple your investment—or lose it all—often within weeks or months. Options present drastically different returns and risks, so it’s crucial for investors to understand how they work before getting involved. Though stocks are risky, options can be even more dangerous.
Did you know you can copy the trades of adept traders in the online trading market? Yes, copy trading allows you to simply copy another trader’s positions without the arduous task of market analysis. This article will serve you well if you believe in mentorship or modelling your life after others. But let’s slow down.
As a beginner getting the knack of trading, you’d likely appreciate a mentor to take you through the baby steps. They’d give you valuable insights and information. But if you don’t have one, you are still safe with tech, which takes us back to where we started – copy trading.
Copy trading is now a popular investment strategy, especially for tenderfeet. It enables you to learn without the steep learning curve. This article provides particularised insights into copy trading for beginners in the UK. Find out what copy trading is, how it works, and the steps to start. You also learn the associated risks, legal considerations, and pros and cons.
Copy trading is a form of trading that allows you to copy positions opened and managed by a more experienced and successful trader.
Perhaps you’re saying that’s mirror trading. It’s not. It’s quite different from mirror trading, so don’t confuse the two. But they are both examples of social trading as they lift you the burden of directly engaging in the market, picking trades on your behalf.
The two are pretty similar, except that mirror trading.
Mirror trading refers to a trading style where you automatically copy trades executed by a variety of auto-trading and signal services. Copy trading is similar to mirror trading and enables you to directly copy a trade or a trader you want to emulate.
Both mirror trading and copy trading fall under social trading. Instead of directly trading the market, you follow, interact with, or mirror expert traders.
Mirror trading automatically follows every signal without your intervention, whereas copy trading lets you choose a specific trader to follow. When that trader makes a trade, your account replicates it. You select an individual successful trader to copy and focus solely on the trades.
Mirror trading, on the other hand, uses the trading patterns of multiple successful traders to guide your trades. Essentially, copy trading is an advanced option of mirror trading.
This automated trading strategy allows you to copy the real-time choices of a chosen professional trader, benefiting from the expert’s experience without needing to make your own trading decisions. By mimicking more experienced traders, you can achieve similar returns.
Copy trading involves choosing a trader whose trades you want to copy. Once you have selected a trader, the platform will duplicate every trade the trader makes to your trading account in real-time. It happens each time your chosen trader places a trade. So, your account automatically makes the same trade whenever the trader trades. However, the trade size is subject to the capital you have allocated for copy trading.
A manual copy trading version also allows you to copy but offers discretion. You’ll copy the trades but decide when to enter or exit positions based on your intuition.
In automated copy trading, you enter and exit the position whenever your chosen trader does it. The systems monitor your trade based on this condition.
The three critical components of copy trading are the platform, the master, and the learner. Not all traders are masters, so there are not many. Copy trading platforms often rank them based on their historical performance. Here, a master refers to an experienced trader who serves as a mentor. Not all platforms support copy trading, so consider this when choosing your platform. Options like eToro and CopyFX are available for those interested in a copy trading platform.
As the follower trader, you can copy the trades of your masters, benefiting from their skills and strategies without the stress. The role of the master trader is crucial in this process, as their experience and success can significantly impact your trading performance.
Copy trading saves you a lot of headaches. You’ll skip a lot of requisite steps in typical trading. The key is getting the best platform with some of the best expert traders who trade you can copy. It’s a quick way to learn and earn money from trading.
In normal trading, before anything, you decide your style based on your personality and risk tolerance. You’d also consider your availability and the best time to trade as you must vigilantly follow the market and make quick decisions. Even in swing trading, where you may hold a stock or trade for weeks, you can’t pick your trades and abandon them.
In copy trading, your focus is on the trading platform. Anyway, here is a step-by-step guide.
The internet is awash with brokers that claim to offer the best copy trading services. Don’t fall for their words. Choose a trustworthy copy trading platform regulated in the UK. Pay attention to the copying trading fees and commissions, payment options, withdrawal charges, and more. On this platform, we review and identify the best copy-trading platforms. You can pick any from the ones we have vetted.
The next steps are to create an account, verify it, and pick your preferred payment method. Deposit the trading funds.
Most copy trader websites list expert traders whose trades you can copy. Choose one from the available list based on their performance history, risk level, and trading style.
The platform will copy every trade your preferred copy trade makes. You need a budget even if you are not trading yourself. Manage your bankroll to stay within what you can afford. You may follow many traders, so subdivide your funds as you need them per copy trader.
Your attention may not be necessary for picking trades, but your portfolio performance. Manage your bankroll and use risk management tools like stop-loss orders to limit losses. Also, make the necessary adjustments, like adding more funds or reducing your allocation to a specific expert.
While copy trading offers a convenient way to follow successful traders, it’s important to be mindful of how trading or investing can impact an investor’s mental health. Discover more about the psychological aspects of trading to ensure a balanced approach.
Risk and investment are seismic twins; you can’t have one without another. In trading, risks happen for various reasons, and with them come opportunities and threats. The unwritten rule in trade and investment is the more you risk, the higher your expected returns, the lesser risk you take, the lower your expected returns.
By participating in copy trading, you might have less control over your investments, which could expose you to more risk and market changes. Some people worry about giving up decision-making power to someone else, seeing it as a form of discretionary service. But, most copy trading services operate as non-advised or “execution only” platforms. So they require a lower level of regulatory authorization.
It’s important to find a balance when copy trading. Interacting with other traders and sharing information can be helpful. You must, however, avoid the heard mentality – doing something because others are doing it. If a large part of the market does the same thing, there could be a market bubble and instability.
Relying too much on others’ performance, which copy trading makes you do, also inhibits the development of your trading skills.
All in all, we summarise the risks associated with copy trading as follows:
Other than the above unique risks, as a trader, there are risks generally associated with trading like possible loss of funds. You should take the necessary cautionary steps to alleviate them. Once you understand these, you can quickly find a balance and be prepared for the challenges that may come up along the way.
All matters of finance regulation in the UK are under the Financial Conduct Authority (FCA). So, it regulates trading, which includes copy trading.
The FCA is among the best regulators in the world. It has strict rules to protect traders and investors by ensuring that trading platforms are fair and transparent. If you use a platform that follows the FCA’s rules, you’re helping to protect your investments.
The FCA views copy trading as the automatic execution of trade signals. It groups it under portfolio or investment management. So the same rules are as financial instrument derivatives. These rules follow the MiFID Directive by the European Securities and Markets Authority (ESMA). But it is different in cases where you are minimally involved in execution. When you don’t approve each trade as a copy trader, the FCA may not consider your activity as portfolio management. You should know how the FCA groups it as this helps you make a better choice.
Many newbie traders love copy trading as because it shifts the focus from the burdensome statistics. It’s an ideal option if you are less interested in how trades work and are seeking a hands-off trading approach. But it’s not without shortcomings.
Yes. Pick a broker authorised by the FCA. Such a broker has a license to offer clients copy trading legally.
Yes. Copy trading allows traders to earn while just starting to trade potentially without extensive market knowledge. They also learn from experienced traders.
There are no guarantees of profit. Profitability varies and depends on the performance of the trader being copied. Also, other factors like market conditions, risk management, and the cost of trading may affect it.
The minimum amount varies by platform, but typically you can start with as little as £100.
Copy trading is a good way for new investors in the UK to join the financial markets. It is ideal for new traders seeking a hands-off trading approach. It simplifies entry into trading in markets. You can trade forex, derivatives, stocks, and cryptocurrencies without any prior skills. It is, however, crucial to understand the risks involved and choose a regulated platform. Also carefully pick the best copy trader platform and actively monitor your investments.
So, are you ready to copy trade? Start your journey here by finding the platform that best suits you, and benefit from the expertise of our professional traders. Happy copy trading.
As the world’s largest and most liquid market, with over £5 trillion exchanging hands daily, the forex market offers massive opportunities, making forex trading an attractive venture for many. Today, whether on TikTok, Facebook, Instagram Reels, or Twitter, people are discussing how to make money trading forex. But can one ever make money through forex trade in the UK?
The answer is yes, but only if you are skilled enough. As a beginner in the forex market, you’ll find it confusing without the proper knowledge and skills. If not trained and mentored well, you can easily suffer huge losses. But that shouldn’t be the case. All you need is commitment and a good attitude; from the look of things, you already have them; otherwise, you wouldn’t be here. This article helps you get started start trading forex in the UK.
Traditionally, when you had the British Pounds (GBP) but wanted them in US dollars, you’d walk into a forex exchange bureau or a bank and do the exchange over the counter. This process of exchanging one currency to another at an agreed rate per unit price is forex exchange.
When you convert currencies for practical use and not for profit, that’s currency conversion or forex exchange. But when you do this exchange to benefit from price fluctuations, that’s forex trading.
Simply put, forex trading is to speculate on currency price movements to make a profit.
Forex traders predict price movements intending to capitalise on the margins.
The forex market is globally decentralised today, adding to the over-the-counter (OTC) option. You can exchange the currency right in your hand without moving an inch.
Forex, a foreign market, or simply FX, is the marketplace constituted by brokers, a network of banks and financial institutions that facilitate the buying and selling currencies. It’s open 24 hours a day, five days a week, allowing traders to trade currencies anytime.
In forex trading, currencies are paired, such as GBP/USD (British Pound/US Dollar) or EUR/GBP (Euro/British Pound), implying that one is exchanging for another.
To understand how forex trading works, you must understand its basic concepts, which include:
In forex, currencies are in pairs. The first currency in the pair is the base, while the second is the quote.
The price of a currency pair shows how much of the quote currency is required to buy one unit of the base currency.
Two fundamental prices are essential in forex trading: the bid price, the prevailing market selling price of the currency pair, and the ask price, which is the price the market buys the same pair. The difference between the two prices represents the broker’s profit, which we call the spread.
But you may have heard about forex spread betting as well. Spread betting in forex is speculating whether the market price will rise or fall. When you engage in it, you don’t trade the underlying currencies but the market that tracks the price of a forex pair.
When you spread bet, you speculate based on the movement of the underlying currency. For example, if you believe the AUD/USD futures prices will rise before Sep 23, you would take a long position. If the prices did rise, your profit would depend on how much the market grew.
You use leverage when trading forex with a spread betting or CFD trading account. Leverage means you only need to put up a portion of the entire trade value to open a position, known as margin trading.
Leverage allows you to take a larger position than you can afford. While it can increase profits, it also raises the risk of losses, as your exposure in the market is based on the position’s total trade value.
You need a trading platform provided by brokers to execute trades. These platforms offer various tools and features, including real-time charts, technical analysis indicators, and order execution options.
In forex, currency pairs are often divided into major, minor, and exotic (or emerging) pairs. Your trades swap the strength of one currency against another.
The fundamental principle here is to understand that the market quotes all forex in terms of one currency versus another. As we’ve learnt, each currency pair has a ‘base’ and ‘quote’ currency.
If you foresee the “base” currency getting stronger than the “quote” currency, you will BUY that currency pair. Alternatively, if you believe the “quote” currency will weaken against the “base” currency, you would also SELL that currency pair.
When you take a long position and BUY, your profits rise with the currency pair’s value. But you incur a loss when the pair falls below your open level.
Examples
1. If you go long and ‘buy’ EUR/AUD, you speculate that the euro will increase relative to the Australian dollar.
2. Alternatively, if you go short and ‘sell’ USD/GBP, you speculate that the US dollar will weaken against the pound.
As a beginner, avoid the highly volatile currency pairs. Trade the majors as they are the most liquid and least volatile.
Note that the US dollar is the most widely used currency in the world, making up about 60% of all central bank foreign exchange reserves. Unsurprisingly, the US dollar is present in many of the ‘majors’ that account for 75% of all forex market trades.
Read about the Opportunities and Risks in Trading Emerging Market Currencies in our other article.
With the understanding of the concept of forex trading UK, you are ready to engage the first gear. But take it easy; you are still learning the ropes. Here is the step-by-step guide to how to start forex trading.
You may not know it, but when you started reading this article, you had already begun trading forex because the first step to do it is learning how we do it. Isn’t that what you are doing now? Before anything else, it’s crucial to educate yourself about the market, the key concepts and fundamental principles, and learn a few trading strategies and risk management tricks. You are already doing this, but you can expand your knowledge further by taking an online course, reading our other materials, reading beginner books, and researching other resources.
The next important step is picking a broker. You can’t trade forex directly. You need a reliable intermediary to facilitate your trades. In the UK, you look for brokers regulated by the Financial Conduct Authority (FCA). Such brokers offer more than a trading platform. They have excellent tools, adhere to strict regulatory standards and offer the best services.
After selecting a broker, open a trading account. But always check with your broker; not all offer the same types of accounts. They have varying accounts to meet various trading needs and capital requirements. Afterward, download the platform provided by your broker. Popular platforms such as MetaTrader 4 (MT4) and MetaTrader 5 (MT5) offer advanced charting tools, technical indicators, and automated trading options.
As a beginner, use the demo account to try forex trading with zero risk of losing money. Most brokers will provide you with 10,000 virtual funds to practice buying and selling in actual market conditions. But once you are comfortable, you can deposit funds into your account and trade forex for real money. Most brokers offer multiple funding options, including bank transfers, credit/debit cards, and e-wallets.
But before you begin trading for real money, have a trading plan. This plan outlines your trading goals, risk tolerance, and strategies. It is a blueprint that will guide your activities, ensuring you don’t get carried away, stay disciplined, and avoid impulsive decisions.
With your trading plan in place, start trading by analysing the market, identifying trading opportunities, and executing trades. Monitor your trades regularly and adjust your strategies as needed. Ensure you always have enough margin in your account and keep track of your overall risk exposure.
Get list of the best forex brokers in the UK in our other guide.
As with any investment or business, forex trading has risks, and beginners must identify, understand and learn how to manage them effectively. These risks include:
As you start your journey in forex trading, it’s crucial to understand the impact of market volatility on investors mental health. Learn more about managing the psychological effects of trading to stay grounded in a fast-moving market.
Forex trading offers exciting opportunities for traders, but it’s essential to approach it with caution, education, and a well-thought-out strategy.
Yes, you can. Many brokers allow you to deposit as little as £50. The greater the amount, the better; that gives you more freedom and flexibility in managing your risk.
Beginners can learn forex trading through online courses, tutorials, books, demo accounts, and by studying market analysis and trading strategies.
Forex trading makes you money by profiting from the price differences. Buy low and sell high, or sell when the prices are high and repurchase it at a lower price.
Yes. Forex trading can be a source of extra income, but beginners should educate themselves and practice with a demo account before getting in for real money.
No. Forex trading is not like gambling if done with proper analysis, risk management, and a strategic approach. However, trading without knowledge and strategy can resemble gambling.
Forex trading is exhilarating but sounds daunting for beginners. With a market driven by over £5 trillion daily, success hinges on knowledge, skill, and disciplined risk management. It is easy to get lost in pursuit of quick profits, so keep your guard up by committing to learning and honing your skills and strategies.
Are you ready to start trading forex? Start here by picking the right broker. You can also check our other pages for more information. We cover the basic principles of this trade, beginner strategies, and real-life forex examples. You’ll also find tips for success and step-by-step guides.
If you have been interested in trading, you must have encountered CFDs and the constant warning that often follows them. The disclaimer usually says they are highly speculative and high-risk, and you could lose money. While it’s true that CFDs are high risk, it’s also true that high risk brings high rewards. Any investment with a huge loss potential equally has a high payout potential. That’s what they don’t tell you. Thank goodness in this piece, we discuss CFD trading UK, how to get you started, and what to watch out for in this high-end game.
Before we even define CFD trading, what is a “Contract For Difference” or CFD?
A CFD is a special tradable agreement that allows you to predict the shooting or falling of prices of an asset. You just predict the price, not buying the asset, so you don’t own the CFD’s underlying asset.
In this agreement, you and the CFD seller agree to exchange the difference in the value of a financial product between now and when the contract closes.
Practically, you make money by correctly predicting price changes without buying the asset. You benefit profit if your predictions are correct, but you lose money if they’re wrong.
Back to our question: what’s CFD trading?
In practical terms, we use “CFD trading” and “CFDs” interchangeably. Both terms describe the activity of trading Contracts for Difference. However, “CFD trading” specifically means engaging in trades using CFDs, whereas “CFDs” is a more general term that refers to the financial instruments themselves.
So; CFD trading describes buying and selling financial derivatives without owning the underlying asset.
Trading CFDs involves predicting price movements in financial markets. Unlike traditional trading, which terminates with the exchange of ownership, there is no transfer of ownership in CFD trading. Instead, CFD investors speculate on the price movements of assets without owning them.
For instance, rather than purchasing oil barrels, you speculate on whether the price per barrel will rise or fall. If the trader buys a CFD and the price of oil increases, they can sell the CFD at a profit based on the price difference. Conversely, if they sell a CFD and the price decreases, they can buy it back cheaply and profit from the difference. Here are the basic concepts.
You decide the direction of price movements, up or down, and open a CFD position. You do this based on your prediction of how the asset’s price will move. The position is either you go long – “Buy” – or go short – “Sell.” The result can either be a profit or a loss.
When you open a CFD position, you agree to settle the difference in the asset’s price from opening to closing the contract.
CFD trading often allows you to borrow money to open and control larger positions with a smaller upfront investment. Since you are staking borrowed money, you magnify both your potential gains and losses, so you must exercise caution.
When you use leverage in CFDs, you only stake a percentage of the full value. The broker loaned you the top-up to gain the full position. This small initial deposit is the margin.
Here is an example:
Suppose you want to trade CFDs on 100 shares of a company like gambling giant Entain plc, where each share costs £666. To open this trade, you only need £13,320, even though the total value of the shares is £66,600, because CFDs allow you to control a larger position with a smaller initial investment—just a 20% margin. But that doesn’t exempt your gains or profits. The gain or loss will be based on the total amount, not just the initial £13,320 you used to open the trade.
At the close of the contract, the CFD broker credits or debits your brokerage account with the net profit or loss. You also incur a commission on trades depending on the broker you choose and the market you trade.
Employing portfolio management tactics to manage your risk levels would be best. Stop-loss orders help you limit the loss you can suffer. Also, spread your choices in various financial markets, including stocks, commodities, currencies, and indices. After all, you don’t need to own them.
CFDs and spread betting in trading are from the school of thought – they are high-risk complex instruments as they use leverage. So before you try CFD trading, you must understand its ins and outs and be confident you can stomach the risk. Don’t just focus on the profit potential, but the downside potential as well.
Having said that here are the basic steps in starting CFD trading in the UK:
You are already doing well. In the previous sections, we have explained CFD trading and how it works at length, which gives you a head start already. You already know that it involves buying and selling Contracts for Difference (CFDs), financial derivatives that predict the rise and fall in prices of various assets. The assets could include shares, indices, commodities, and forex. You don’t buy these assets, but profit or loss based on the price difference at the start and close of the contract period.
For risk-free learning, practice with a demo account using virtual funds. That way, you can develop skills and strategies before trading with real money.
Many trade brokers claim to offer CFD trading, but each has different types of accounts. We review these brokers and help you pick the best FCA-regulated broker. But if you are shopping for one by yourself, always pay attention to these areas in particular:
The broker’s range of markets includes individual stocks, currency pairs, indices, exchange-traded funds (ETFs), and commodities.
The leverage and margin: In our example above, the broker offered a 20% margin and a leverage ratio of 20:1. The ratio indicates how much larger our position in the example can be against our initial investment. In our case, it’s 20 times your initial investment. But note that the FCA now limits retail clients’ access to leverage. You must prove you are eligible to trade with a 500:1 leverage or be content with 30:1 or 20:1. But this is for your good. A huge leverage ratio is of no use to a beginner.
Commissions and spread: All brokers make money through commissions and spreads. They often clearly state this in their terms of service. In most cases, they charge a percentage of a position’s size, especially for crypto and share CFDs. You want a broker whose percentage rate doesn’t burden you too much.
Ease of transacting and associated costs: Check the payment options, and if you are comfortable with the available options, look at the initial deposit requirements. You also want a broker who offers quick and convenient transactions at an affordable rate, whether deposits or withdrawals.
If the broker checks all your preferred boxes, open your account with them and verify it. You can then fund it with your favourite deposit method.
Select the market you want to trade from various options, including shares, indices, forex, commodities, etc. Decide if you wish to trade in the spot market for short-term trading or futures for medium to longer-term positions.
Open your trade, and, based on your market analysis, intuition or whatever you use, decide whether to take a ‘buy’ position (if you expect the price to rise) or a ‘sell’ position (if you expect the price to fall).
Once your trade is open, monitor its performance through the trading platform. Based on market movements, you can close your position at any time to take profits or limit losses.
Set stop-loss orders to close your trade if it moves against you automatically, and set profit-taking limits to secure your gains. These risk management tools help you control potential losses and lock in profits.
Even though CFDs are quite popular, a beginner CFD trader might need assistance. But they say, forewarned is forearmed. So, you must know what you’re doing and the dangers involved. Discipline and attentiveness in monitoring your positions are arsenals you can’t ignore. The idea is to have a level head regardless of market volatility. Don’t let your emotions get in the way.
The common risks associated with trading CFDs for beginners include:
CFD trading might be suitable if you understand the risks, have sufficient market knowledge, and can manage leverage effectively. If you are a beginner, start with a CFD trading demo account and ensure you can handle the potential losses.
The best platform for you depends on fees, features, ease of use, and customer support. Some popular CFD trading platforms in the UK include eToro, CMC Markets, and Plus500.
Yes, profits from CFD trading are subject to Capital Gains Tax (CGT) in the UK. However, CFDs do not incur stamp duty. Always consult a tax advisor for specific assistance.
Yes, CFDs are legal in Europe, but they are regulated. Each European country may have specific CFD trading rules and regulations to protect retail investors.
As you begin your journey into CFD trading, it’s crucial to understand your risk appetite. Are you naturally cautious and risk-averse, or do you have a higher tolerance for risk? Knowing this can significantly impact your trading decisions and strategies. But generally, CFD trading is an advanced form of investment and is typically a field of experienced traders. It’s a powerful option for capitalizing on short-term market fluctuations but carries significant risks.
If you are ready to explore CFD trading confidently, pick a broker here and try CFD trading in demo mode. You can also learn a few things, including risk management techniques tailored to your trading style, right here. Equip yourself with the knowledge to trade wisely and effectively. Start learning now and make informed trading decisions!
