Naz
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Most UK traders and investors know that their market direction is taken from the US and leading up to 2.30pm the UK market anticipates the US opening.
If one was to buy a UK stock after 2.30pm it would cost 1/2% stamp duty and say 3/4% spread.Making an ingoing cost of 1 1/4%.
After the UK market shuts the US market continues and some of the major moves up and down occur when Wall st comes back from lunch at 2pm EST(7pm GMT)
If the US markets fell 3% during their afternoon,then when the UK market opened the next day our stock could very well be marked down 3%.We could then sell it with 3/4% spread and the whole trade would have cost us a 5% loss.This gives us no chance to manage our trade at all.
Now if we consider a a UK trader trading the Nasdaq at the same time.He could buy a simailar stock or even the same stock(if it traded on the Nasdaq).His purchase could be taken on the bid (saving the spread).His trade also encounters no stamp duty.
When the US markets fall in the afternoon he manages his trade and looses say 1% before he sells on the ask,once again saving the spread,
When he sells he may choose to sell twice his position leaving him net short the same amount.(this saves an extra execution fee).He rides the short to the close, buying back on the bid at the end of the day,once again saving the spread.Making a profit of 2% in line with the overall market conditions mentioned earlier.His overall profit will be 2% less his earlier 1% making a net profit of 1% on the whole transaction.
As we can see the UK trader makes a loss of 5% because he cant manage his trade, whilst trading the same stock in the US allows the trader to manage his position and save costs giving him a net profit of 1%.
This for information only and not intended as any financial advice
If one was to buy a UK stock after 2.30pm it would cost 1/2% stamp duty and say 3/4% spread.Making an ingoing cost of 1 1/4%.
After the UK market shuts the US market continues and some of the major moves up and down occur when Wall st comes back from lunch at 2pm EST(7pm GMT)
If the US markets fell 3% during their afternoon,then when the UK market opened the next day our stock could very well be marked down 3%.We could then sell it with 3/4% spread and the whole trade would have cost us a 5% loss.This gives us no chance to manage our trade at all.
Now if we consider a a UK trader trading the Nasdaq at the same time.He could buy a simailar stock or even the same stock(if it traded on the Nasdaq).His purchase could be taken on the bid (saving the spread).His trade also encounters no stamp duty.
When the US markets fall in the afternoon he manages his trade and looses say 1% before he sells on the ask,once again saving the spread,
When he sells he may choose to sell twice his position leaving him net short the same amount.(this saves an extra execution fee).He rides the short to the close, buying back on the bid at the end of the day,once again saving the spread.Making a profit of 2% in line with the overall market conditions mentioned earlier.His overall profit will be 2% less his earlier 1% making a net profit of 1% on the whole transaction.
As we can see the UK trader makes a loss of 5% because he cant manage his trade, whilst trading the same stock in the US allows the trader to manage his position and save costs giving him a net profit of 1%.
This for information only and not intended as any financial advice
