Now it’s your turn. At this point in the course we have set a task to reinforce what we’ve shown you.
Goal: To review some of the main factors that might influence the product you trade.
Exercise: New traders often don’t spend any time working out what the appropriate product is to trade with. This is not an exhaustive list, nor can we offer any advice, but starting to think about fitting the product to your preferred style early in your journey as a trader can be helpful. Here are a few factors to consider:
Are you a trader or an investor? We’ve learned that when trading on margin you are effectively borrowing money from your broker. Like all borrowing, this will cost you by way of a financing charge, the cost of which might be negligible if you hold positions for short periods of time but a significant factor if held for long periods. It might be that margin trading is not right for your trading time frame.
Where do you live? You might not be allowed to use some product types.
What is your tax domicile? We discussed in the videos the headline tax treatment of all three products. You should know whether your trading activities are taxable.
What markets do you trade? You can speculate on FX markets in each product type but some markets, like indices, are only available as a CFD or spread bet. Get clear on the markets you want to trade.
Difficulty: 2/3
Time to complete: 30 minutes
Solution…because it relates to your situation there is no set solution to this task, which is why we haven’t done a video solution. We just want to get you thinking about it, if you have questions about financial products or tax it is important you seek advice from a recognised professional advisor.
