Meristem Securities Limited has just launched a new trading platform which it calls ‘Nigeria’s first naira multi derivative assets platform,’ or MeriFX.
According to Meristem, with MeriFX:
“You can now trade Forex, Commodities, Indices and Equities all from one trading account in Naira. MeriFX offers you the chance to trade the world’s most popular financial markets at your fingertips.”
But the catch is that you are not really trading (buying or selling) anything that you can own, but merely engaging in something called ‘spread betting’.
Unlike stocks whereby you own a piece of a company when you buy, when you spread bet, you are only speculating on the price movements of thousands of global financial markets including indices, shares, currencies, commodities and more.
You can use spread bets to speculate on price movements irrespective of whether the markets are rising or falling.
If you go long (buy), your profits will rise in line with any increase in that price. If you go short (sell), your profits will rise in line with any fall.
Similarly, if you go long on the price and the underlying stock price falls, you will incur losses.
Another risk for untested traders is the huge leverage involved in spread betting meaning the market doesn’t have to move against you by much to wipe you out.
The minimum trade size on MeriFX is $200 or N40, 000.
We at Nairametrics believe in innovation and applaud Meristem for bringing MeriFX to Nigerian traders.
However any inexperienced trader should probably sit this one out as getting involved with derivatives could wipe out your entire capital in a matter of seconds.