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Spread Betting Strategies

Spread Betting Strategies

Experienced financial spread traders thoroughly research stocks and have a clear strategy for their entry and exit points for trades. If you do not have a strategy then you are purely gambling and your trades will be at the mercy of the markets.

Don’t be misled by the word ‘betting’. Spread betting is a form of financial trading. Take the time to define your strategy before you start trading, refer to your strategy whilst you are trading and after you have traded confirm that your strategy is still good or if it needs adjusting.

Here are some points to consider when defining your strategy:

  1. Which Markets are you interested in. The key to developing a successful and profitable trading strategy is to research, research and do some more research. Follow the market data releases, keep yourself abreast of company trading updates. Study both long and short term trends or maybe get a ticker in your browser that displays all the latest breaking news that could have an impact on your market.

  2. Choose your risk appetite. Some instruments have a greater volatility than others. If you are looking for larger gains over the short term then an index with a wide swing may suit you.  Alternately a slower moving price like an equity share may be preferable. It's important you understand your own risk profile and decide on the markets that you feel comfortable to trade.

  3. What is your trading timeframe? Are you a day trader, swing trader or longer term? Chart indicators of entry point and resistance points can change greatly depending on 5 minute, 30 minute or daily intervals. Are you looking to make a quick gain on a rebounding price or make returns from a gradual rise over a few days?

  4. Join the dots between markets. For example food industries that are dependent on wheat or airlines that are dependent on oil prices. When stocks fall, investors can sometimes run to the safe haven of gold. When you have chosen your markets understand your dependencies and follow news feeds that are connected to your chosen strategy. There could be correlations that keep you better informed.

  5. Technicals or Fundamentals. Some traders use technical statistics for trading and others rely on fundamental analysis. Decide if you are one or the other (or both) and ensure you have defined what signs in your analysis are solid indicators for a trigger to trade.

  6. Write it down! Once you have designed your strategy, write it down and create a checklist you can refer to before you enter or exit a trade. Always confirm that you are trading to your strategy and not going “off piste”. A strategy can be refined if it is not working but don’t let yourself change the approach without re-writing it and starting again.

  7. Keep it simple. Don’t over complicate your strategy. Create simple rules you can follow regardless of the market conditions.

  8. Track results. Note down trades that work and those that don’t. This will allow you to refine and improve your process. Remember however that you are unlikely to gain on every single trade. A good strategy will have more winners than losers and prove that you cut your losses and ride your wins.

Finally, the reason you have defined your strategy is to trade logically. Do not get emotional about your trading. This is what will cause you to stray from your strategy and could ultimately lead to losses.

 
 

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