Q. What will traders look at now that we have a hung parliament in the UK?
A. The whole issue with a hung parliament is that it breeds an uncertain future for how the UK is governed. With no clear majority for the winning party, it becomes increasingly difficult to govern and this comes at a time when fiscal policies require immediate attention to help rein in the UK deficit.
This is one of the key reasons why the pound has been so volatile of late. The focus now will be on how the respective parties progress with their behind closed-doors negotiations to try to form a majority government. Sterling and equity markets alike are likely to remain particularly sensitive to how these negotiations play out and what that means for the economy.
Q. I work a nine to five job and cannot trade during these hours, but want to continue my trading. What do you suggest?
A. For many people, trading or investing is a side project or an opportunity for a secondary income. Trading around your working hours is something that is essential for any successful trader and there are many ways in which you are able to profit from the market.
There are many markets that trade 24 hours a day, giving people the opportunity to trade before and after work. The foreign exchange market is one such example that many clients who trade out of hours consider. It is the world’s largest market, meaning that there is plenty of liquidity whatever the time. It also has low margin requirements so you don’t need a lot of capital to get started.
Similarly, you can also consider trading indices such as the FTSE 100 and the Dow Jones Industrial Average which trade 24 hours Monday to Friday as well.
Q. I have been testing the water with a demo account for some time now and want to make the move into trading the markets for real. Is trading on a demo account identical to a live account?
A. Simulated trading, or demo trading, is good for beginners who need to learn the mechanics of spread betting and how a platform works. When markets are moving fast, you need to know how to place trades quickly and accurately.
A demo account can also be useful for developing rules for your trading. But because you are not trading with your own money, a demo account can lull you into a false sense of security. The psychological aspect of trading which comes into play when you use real money can greatly affect your risk tolerance and your ability to stick to your trading plan and remain disciplined in the face of the marketss.
Demo accounts are good at the start, but look to move to a real account as soon as you can, but only place low stakes.