Best Strategy For Against The Spread Betting

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Best spread betting strategies and tips



Becca Cattlin | Financial writer , London


What is the number one mistake traders make?


Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.

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Spread betting enables you to execute a range of trading strategies, thanks to the range of benefits it offers traders. Discover some of the most popular spread betting strategies and some tips for getting started.
A trading strategy is nothing more than a predefined methodology for how a trader will enter and exit the market. It will identify specific market circumstances and price points during which a trader will look to execute and close their trade.
We’ve taken a look at some top-level strategies, and the way they would be carried out using spread bets .
This is by no means a full list of all of the trading strategies that can utilise spread bets. In fact, as long as the platform you are using has the appropriate technical analysis tools, most strategies are suited to using this popular derivative product.
A trending market is one that is reaching higher highs or lower lows. Trading with a trend is usually the practice of those who adapt the ‘ position trading ’ style, and is considered a medium-term strategy.
A trend trader’s strategy would use charts and technical analysis to identify the beginning and end of market movements. This often includes the use of indicators such as moving averages and the moving average convergence/divergence (MACD) to identify where to open and close their spread betting positions.
Trend trading is a popular strategy among spread betters, as they can follow the market momentum regardless of whether they are going long or short.
For example, if the price of soybeans was thought to be in an uptrend, with higher peaks and troughs, a trader might open a long spread betting position. They’d do this by opening a spread bet to buy soybeans. Once the trader has reached their profit target or acceptable loss, or analysis has shown the trend will soon be reversing, they would close their position by selling soybeans.
On the other hand, if the soybean market was in a downtrend, meeting lower highs and lower lows, a trader might decide to open a short spread betting position. They would do so by opening a position to sell soybeans.
Consolidating markets are range bound – so instead of reaching price extremes like trending markets, they remain within lines of support and resistance . This is why consolidating market strategies require traders to use indicators to identify entry and exit points within the range bound market, such as the relative strength index (RSI) .
An important part of a consolidating market strategy is volume analysis. When a market is trading within a range, the volume of trades is usually low and flat, but if the range is about to break there will usually be a rise in volume. This can be a clear indication that it is time for traders to think about closing their positions and, potentially, switching to a different strategy.
Although consolidating markets don’t provide the opportunity for running profits, they can create plenty of opportunities for short-term traders, such as scalpers.
Scalping is a trading style that is designed to profit from small and frequent price changes. Although traders might not make the large, long-term gains you’d see with other styles, they enter and exit far more trades, with the aim of taking smaller profits more often.
Many believe taking such short-term positions might not produce the same results as longer-term strategies but spread betting can help capital to go much further. This is because spread betting is a leveraged product, which means that traders can open positions that are much larger than their initial deposit. It is important to remember that while leverage can magnify your profits, it can also magnify your losses. This makes it crucial to have a suitable risk management strategy in place.
Breakout trading involves entering a trend as early as possible, ready for the market price to ‘break out’ from a consolidating or trending range. Breakout strategies are based on the idea that key price points are the start of a major movement, or expansions in volatility – so by entering the market at the correct level, a trader can ride the trend from start to finish.
Typically, traders looking to take advantage of a breakout will need to identify support or resistance levels – as once these have been met or surpassed, they will need to enter the market. Most breakout trading strategies will utilise volume trading indicators , and RSI or MACD technical indicators to find these levels.
One strategy used to spread bet breakouts is to place limit-entry orders at key price points, so that if the market moves through the support or resistance level, the order is executed automatically.
For example, let’s say you wanted to open a spread betting position on gold, which is currently trading at $1255. Although the market has been trading in a range for two weeks, you believe it is due to breakout into a downward trend. Looking at historic levels of support, you can see that $1250 is a key price point. So, you decide to place an entry order to open a short spread betting position if the price of gold falls below $1249. If the market did fall below this price, your spread bet would be executed, and you could ride the breakout until your analysis indicated the downtrend was over. If the market didn’t fall to this price, your trade would never be executed.
Reversal trading strategies are based on identifying areas in which trends are going to change direction. Reversals can be both bullish or bearish, giving a signal that the market is either at the top of an uptrend, or at the bottom of a downtrend. Traders using this strategy would open a spread betting position in the opposite direction to the current market trend, ready to take advantage of the reversal. This can also be known as ‘contrarian trading’.
When trading reversals, it is important to ensure that the market is not simply experiencing a retracement – a more temporary move. Retracement levels are commonly identified using the Fibonacci retracement tool. If the price goes beyond the levels identified by the tool, it is taken as a sign the market is reversing.
Although reversals can be a complicated spread betting strategy, with the use of indicators, there can be a wealth of opportunities. In order to execute a reversal strategy, a trader will need to utilise a confirmation tool. These can include:
For example, let’s say you wanted to create a FTSE 100 spread betting strategy and decided to focus on reversal trading. Although FTSE 100 has been in a downtrend for the last week, you believe that following positive earnings announcements for major FTSE constituents, the trend will reverse. You decide to enter a position if you identify the double bottom candlestick pattern, in the hopes of taking advantage of the upcoming price increase. If the market did reverse, you would be in a position to profit from the upswing. However, if the market continued to decline, you would suffer a loss.
There are a few key things every trader needs to know before they implement a spread betting strategy. It is important to:
Before you start to spread bet, it is crucial to have an understanding of what spread betting is and how it works .
When you spread bet, you can speculate on the future price movements of a range of global markets, such as forex, commodities, indices and shares. And because you don’t own the asset, you won’t have to pay tax on any profits you make. 1 These are just some of the benefits of spread betting , others include hedging, out-of-hours trading and no commission.
Prior to even thinking about which strategy you are going to implement, you should create a trading plan that will give your time on the markets clear direction and purpose. Your plan should always be unique to you, but most plans include:
When you’re building your trading plan and spread betting strategy, you might already have a market in mind. But if you don’t, it’s important to choose which assets you want to focus on before you start spread betting.
Most people will choose to trade a market that they already have an interest in, so they have prior knowledge that they can fall back on. With IG, you can trade over 16,000 markets, including indices, forex, shares, commodities and many more.
Before you open any spread betting position, it is important to be aware of exactly how much you could stand to lose if the market turned against you. Especially as spread bets are leveraged, you could stand to lose – or win – much more than your initial deposit. It is always wise to think about your trade in terms of its full value, rather than the amount you pay to open it.
One way of mitigating risk and locking in profits is by setting an automatic stop or limit, which will define the level you’d like to close your trade at. Stop-losses will close a trade if the market moves against you, while limit-close orders will close your position once it has reached a certain amount of profit.
Footnote
1 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
Publication date : Friday 24 May 2019 15:11

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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
70% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. All trading involves risk.
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If the strategy a trader employs is a trend following system, then the trader can focus his or her market analysis on identifying or confirming the market trend – and also on keeping a watchful eye out for signs of a possible upcoming trend reversal.
In the stock market, a bullish trend is generally thought to be in place as long as a stock’s price remains above its 200-day moving average.
Many traders look for an opportunity to trade “breakouts”
The price of a stock might advance five points per share, then retrace back downward two or three points, then advance upward another four or five points, followed by another downside retracement…and on and on.
Are you more comfortable with using simple strategies that are easy for beginners to use – or do you prefer utilising more advanced strategies that employ trading techniques such as hedging or arbitrage?
Using smart spread betting strategies dramatically increases your odds of being a consistently profitable trader.
We’re now moving onto Part III of the guide where we’ll show you how you might get good at trading. In this chapter, we’ll cover the importance of trading strategy.
Every good, solid spread bettor relies on one or more good, solid spread betting strategies. Using a specific trading strategy – a spread betting system – accomplishes a number of important goals for a trader engaged in financial spread betting.
It’s impossible to list all the different types of trading strategies that a trader might use. That said, these are some of the most common types of trading strategies, along with some spread betting tips on how best to use them to your advantage.
Trend following strategies are typically guided either by fundamental analysis or by technical analysis that focuses on longer-term charts – such as the daily or weekly charts. Moving averages are a popular technical indicator used by trend followers.
A bullish breakout occurs when the price of a financial asset breaks above an identified resistance level, such as a price level that a security has previously turned back to the downside from.
A downside, or bearish, breakout occurs when the market price drops below an identified major price support level.
Breakouts may also occur to the upside or downside after a security has traded for some time within a fairly defined price range, with no clear trend one way or the other. In such cases, the price breakout is seen as establishing a new trend which should control the market for some time to come.
Trading breakouts is appealing not only for the profit opportunity, but also because breakout trading strategies are relatively simple to execute. On the bullish version traders simply place a “buy stop” order above the identified resistance level – the order is triggered and filled only if a price breakout occurs.
In order to avoid suffering losses from trading such false breakouts, many traders use a momentum indicator such as the ADX or MACD to confirm the existence of a solid trend.
Japanese candlestick reversal patterns are a popular technical indicator used to identify market reversals. Shooting star or hammer (also known as “pin bar”) patterns often indicate a pending market reversal. 
Some traders look for price/momentum divergence indications from momentum indicators such as the RSI or MACD as signals of potential impending market reversals. A reversal is usually confirmed when price crosses over a major moving average, such as the 10- or 50-period moving average.
Price movements, either up or down, of a security do not usually occur in a straight line. Rather, there are “waves” of price movement.
Swing traders aim to buy the interim lows that occur with a temporary downside pullback or retracement, and then sell the next interim high that occurs.
In order to identify probable highs and lows in order to take advantage of swing trading opportunities, spread bettors who swing trade often use a number of technical indicators.
When examining various spread betting strategies and deciding which one(s) to use, it’s important to select a trading strategy that suits you personally. Here are some factors to consider in picking a strategy that fits your personal trading style:
You must have a clear idea of your risk tolerance in order to select a proper trading strategy – i.e. one that you’re comfortable with. If, for example, you have a very low risk tolerance, then you will want to use a trading strategy that places strong emphasis on limiting risk .
Also, a low risk tolerance makes you more well-suited for trading longer term time frames rather than engaging in day trading, which typically involves taking higher risk trades.
The time you have available to commit to market analysis and trading is another important factor in choosing a trading strategy. If you are retired, or work at home and are relatively free to choose your own work hours, then you may have the a
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