Trading Aim Stocks
Spread betting is probably a better method for short term trading than T Trades – that as long as you have plenty of margin and you use a company that demands say a 40% margin on AIM stocks. There is the added advantage of no tax liability. But again you need to mark to market it to bid price and not mid price and look at your percentage loss…etc
In any case too will be using spreadbetting companies particularly Aim stocks. A 40% CGT will ruin AIM shares and give the conservatives a lot of enemies. I use CMC Markets and IG Index, prefer IG. The only bad thing about spread firms is they like to change there terms whenever they wish, which can cause slight problems – like when CMC decided to discontinue quoting Aim stocks. But now spread betting companies seem like an excellent option!
Personally I don’t see the problem with spreadbetting if you are sensible, I only deal in spreads now because you don’t pay tax on it. I workout the amount per point a stock position would give me and then take the position on a spread with cash in the account to cover the whole position. I really don’t see how that is any different or more dangerous than buying the stock. I can see how people get carried away but this game is all about discipline and if you lack it you shouldn’t be buying stocks and shares or spread betting imo.
Trouble is the first time you have a spread betting account what happens is that you have a share that goes say 30% up and you go whoopeee look at all that cash and then you think I can buy some more of something else etc etc ….then one of your holdings you thought was a dead cert goes and hits a duster and halves and you suddenly have to close your portfolio in a hurry. So the trick is to use margin conservatively.
It is quite difficult for a FTSE 100 company to double earnings or market valuation but much easier for a smaller share to achieve this. The problem is spotting the winners as there are a lot of small caps and many companies worth less than £50 million have such a valuation for good reason. Some are here because of a poor track record or strategy, weak balance sheet or incompetent management or just misfortune.
Having said that I’ve made more money spread betting on shares with a larger market cap than AIM companies. The former are more liquid and there’s also more transparency in their markets IMHO. You don’t ever have trouble buying or selling Anglo American, Astra or Lloyds (for example) and don’t often hear their investors saying ‘the bastards have just marked this down to hit my stop..!’
The only way to spread bet AIM stocks is with 50% minimum margin and wide stops. Spread your risk by owning several of them and definitely don’t use tight stops.