NTR And Financial Spread Betting
Posted by kecipe on January 24th, 2020
When trading in financial spread betting one will be trading on margin, this is also termed and known as the 'Notional Trading Requirements' (NTR) as well as 'Minimum Initial Margin Requirement' (Min IMR). This requirement is a set amount of capital that is required by the brokerage firm which needs to be maintained within your trading account. This amount is required to help assure you have funds to cover potential losses.
The NTR or Min IMR is a risk factor which will be quoted for an individual underlying product, the actual price is generally considered to be a sign of what the probable volatility and liquidity of the market area will be. Most brokerage firms will require that this amount of capital always remains in your trading account. In the event you are running low and cannot cover the Min IMR you will be required to top off the account during the contract term.
When the actual spread betting trade has begun you will then have a variation margin. This means that during the actual position, if the movements are in your favor it is added in and if it is against you it is deducted from the variation margin. You will then have 'Total Available Trading Capital' which is the sum of your IMR plus your variation margin.
In the event that the underlying instrument moves against you and you fall below the NTR you will receive a margin call from the financial spread betting company, and be required to immediately top-off the account. Many traders will opt to also cut the position instead of adding to their account. If the trader does not take action, the bookmaker may close the position and the loss will be deducted from your trading account.
It is highly important that you never make a trade that you cannot cover in the event the market moves unfavorably. Many successful traders use the If you can read market signals and take positions keeping risks to wins proportional. Though spread betting can be highly enticing, it surely is not a tool recommended for all investors. There is the opportunity for large financial gains; however there is also a great risk possibility to quickly encounter substantial losses due to the high volatility within financial spread betting.
The 'Minimum Initial Margin Requirement' has been put in place as a risk management tool for both the bookmaker and the investor; however, it is imperative that the investor follow the market movements to protect themselves.Also See: Spread Betting, Financial Spread, Variation Margin, Trading Account, Trading, Margin, Spread
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