Spread Betting Scalping

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Spread Betting Scalping

Most Popular Spread Betting Strategies

What Are the Most Popular Spread Betting Strategies?

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Spread betting strategies come in many different shapes and sizes, and there is no ‘one-size-fits-all’ rule that can be applied. The various strategies and techniques that more experienced traders implement are designed to make it easier to predict potentially profitable trades, and to make longer-term profits more achievable, yet devising a strategy in the first instance can be a difficult and time consuming process – particularly for those just starting out . Traders of all levels of experience implement trading strategies in order to introduce some routine and rules into their trading.
When should you leave a position? Should you short or go long? Where, if at all, should you set your stops ? With a set strategy, you’re attempting to stack the odds in your favour in a bid to eliminate much of the guesswork, ideally paving the way for more consistent and ultimately more profitable trading. So how might a trading strategy start to take shape?
There is no straightforward answer to this question, because there are so many different and equally effective spread betting strategies, all being used by traders around the world as we speak. Some spread bettors are looking to profit from long-term corporate growth, while others prefer to move in and out quickly in order to profit from a falling share price. Some traders are technical boffins who love getting stuck into the raw data, whereas others trade on instinct and wider economic goings on. There’s no right or wrong answer – whatever strategy works for you is the best strategy for you to pursue at that time.
The best advice you can receive about trading strategies is to familiarise yourself with a handful to begin with. Learning one or two strategies you can use to get started can be a good way of finding your feet in the spread betting markets , and in doing so you can start to build up your trading capital. Only then might you consider branching out to increase the opportunities for earning from your financial spread betting.
To make the process slightly easier, here is a quick look at some of the more popular trading strategies employed by spread bettors from all walks of life to improve their chances of placing more frequent winning bets. Choose the ones which suits your objectives and the time you have on your hands to dedicate to your trading.
One of the most popular strategies for traders, particularly in the early stages, is known as ‘scalping’. A strategy which seeks to minimize risk, the theory behind scalping is that by closing financial spread betting positions quickly and taking small gains when they present themselves, the trader is less exposed to downwards fluctuations in price and can build up a profitable pot over time with many smaller trades.
The main advantage here is the preservation of capital – by scalping individual profits of a few PIPs as they arise, the trader is banking a profit at every turn with a view to creating a stable stream of income and increasing capital throughout a trading day with minimal downside exposure.
Obviously, the main strength of scalping is also its main weakness, and less disciplined traders may quickly get frustrated at closing positions that turn out to deliver hundreds of PIPs in favour at such an early stage. However, for the risk-averse trader, and particularly for traders that are new to the game, trading on this short-term multiple basis is a good way to get started without jeopardizing their capital amount.
Likewise, scalping requires almost constant engagement throughout the trading day if you’re looking to make any significant level of profit, constantly opening and closing positions in response to the market and incorporating the comparatively expensive trading costs of such a strategy in the process. Compared to longer term trading, this can be quite stressful, and requires a constant hands-on approach which might not be suitable for every spread bettor.
Trading on market trends is another common trading strategy used by spread bettors, who jump on a market bandwagon after a combination of factors are triggered and effectively ride the wave of price movements. This takes place over the course of the trading day rather than a few minutes (as with scalping), and renders transactions costs minimal while presenting potentially wild gains.
The perfect scenario for trading on trends appears when an announcement is made or a news story breaks and the markets just begin to react to that announcement. While the first few minutes can be a volatile period, identifying the start of a price trend in either direction can give the trader a clear indicator of which position to adopt, and takes advantage of your individual dynamism over larger funds to adopt savvy but early positions. In contrast to scalping, this kind of strategy allows you to open a position slightly ahead of the rest of the market, to capitalize on the potentially significant reaction of an index price as the market moves on-trend.
Of course, this is just the second potential spread betting strategy, and there are countless others and variations that traders can implement. Ultimately, it is up to the individual trader to determine what works best for them, but devising a solid trading strategy remains a key element in profitable, consistent spread betting.
Reversals trading involves analysing, with recourse to graphical performance data, the point at which a market or index is likely to reverse based on perceived over- or under-pricing. When analysing the performance of a market over a recent period, it should become apparent as to where the upper and lower limits of the index have been. As a market or share approaches either of these limits, reversals trading strategies advise that you keep an eye on the index movement and prepare to pounce at the first sign of reversal, capitalizing on the gains made over the course of the price correction.
Reversals trading is particularly popular in that it is a reactive, low-risk strategy that doesn’t attempt to second-guess, but more moves in line with market reactions. Compared with other spread betting strategies, this means its possible to ride the wave of a price correction without having to come in ahead of time, minimizing the potential for losses whilst also reaching a happy medium in terms of the gains achievable.
Trading break-outs with spread betting can be a great way to capitalise on strong price movements, and it is often possible to predict where a price is preparing to rocket through its previous boundaries. Spread bettors using this kind of strategy will wait until an index breaches its previous upper limits, usually for two or more successive days, giving an indication that the market is particularly and unprecedentedly bullish, and the price may be about to rise (similarly it can be done for a bearish market when an index (or any other asset) breaches its previous lower limits).
When trading shares through such a strategy, you would ideally position a stop loss at the pre-existing upper limit to counter the impact of a failed price break-out, but as a reactive strategy (i.e. the index is already moving favourably when the bet is placed), the downside risk is limited only to situations where the index has been overly-inflated – by which time, the trader will look to have locked in his profit and moved on to another trade.
Casting your eye over the tried and tested spread betting strategies is an important and effective way of improving your consistency and developing some structure in your trading. While it is not always possible to guarantee success through a particular strategy, or even through a combination of strategies, it’s a good idea to devise a system that works for you over the long term to deliver more frequently profitable spread trades, and to stack the odds more in your favour than with a disorganised, scattergun approach.
Trading as a spread bettor is an intricate and involved process, and all too often the novice trader simply doesn’t understand the workload and effort involved in getting it right. With so much going on around the world markets on a second-by-second basis, it can be difficult to keep up to date with all the different variables factoring in to the equation, and traders often fall back to rely on graphical analysis methods to alleviate some of the burden. Graphical methods are a surprisingly accurate way of trading market behaviour, given the cyclical nature of most world markets, and as a result it can be possible to use simple graphical analysis to devise effective trading strategies.
One such method is known as tramline trading, and requires a simple exercise in joining the dots. Looking at a graph for a market over a particular time (which should be easily achievable within the confines of your current spread betting platform), you will notice a number of turning points where the market moves from and upwards to a downwards slope, and vice versa. Look at each of these points in turn.
Now look at the graph as a wider picture. When you look at graphical data the first few times you appreciate that is looks confusing and hard to interpret, but it actually presents extremely useful information, allowing you to establish virtual tramlines in which you can more effectively position your trades.
Firstly, look at the overall trend of the highest price points over given cycles. Is the market rising or falling overall? This should be apparent from looking at the gradient of the graph – does it go up or down?
The next step is to look at where the turning points sit on the upper part of the graph. If you can link these points with a straight line sloping either up or down you have the makings of a tramline trading environment, whereby two parallel connecting lines can be drawn between the resistance and support levels of the market.
These lines will represent the points at which the markets are pressured into reversing, either because the market becomes over or underpriced. In a nutshell, the strategy then is to buy when the market turns at a support level and to sell nearing the point of resistance, taking advantage of these organic market pressures to make your profit.
What is striking is how well the markets actually adhere to their own unwritten rules in this regard. Markets are driven largely by institutional investors with too much to lose by getting it wrong. As a result, they tend eventually towards rational decisions, with fluctuations on either side being pulled back and reversed over time. This gives markets their natural cycles, which allow shrewd traders to capitalise.
Trading through the parameters of tramlines is a particularly effective strategy for spread bettors, allowing the capitalisation on large price swings through a leveraged trading method. By implement a strategy based on trading resistance and support levels, supported graphically by the identification of tramlines, it is possible to pick better, more profitable trades more consistently.
Find Your Spread Betting Strategy. Don’t try to look for the best strategy out there, use your own criteria and research and find the strategies which work for you and your circumstances. Trading strategies can be short and long term so you have to evaluate your time and see for yourself how much time you want to contribute to financial spread trading.
Independent Investor is a news and educational portal covering latest events in the world of trading and investment. Information on this website is for informative purposes only. Between 74-89% of retail investor accounts lose money when trading CFDs, forex, and spread betting. You should consider whether you can afford to take the high risk of losing your money. Independent Investor offers an unbiased and independent broker comparison service, but we may receive compensation from the listed brokers.



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A: Comment: Don't really think this is a fair complaint. In the real market you dont get filled when the price moves away from the one you want and yet its perfectly simple get filled when it moves against you. Try lifting the bund when the flipper is in there and see how many fills you thought were yours but are now just sitting in the book...

LCG are a business and businesses need to make profits. Why would they take a trade from you that makes a loss right from the start? It just doesn't make sense, they'd go bust in the long run. I agree that sometimes its an ar*e but that's life, if 1-2 ticks makes that big a difference to your trading model then DMA is probably better than spreadbetting. I'm not saying its ideal I'm just suggesting you think about it from a realistic point of view

The point about missing trades on adverse market moves will always be with us. As clients demand ever tighter and tighter 'spreads' such that the word 'spread betting' in many markets is becoming a misnomer. In many of the main markets we quote there is virtually no actual profitable spread to play with and we must in certain circumstances be sure about the levels at which trades go through. If I was quoting 5 points wide on GBP/USD then almost every trade would be 'fair' (from my point of view) as the spread would have taken out any possible price variation.
But, as with the real markets it is much easier to buy than sell into a falling market or sell than buy into a rising one. In the real world if you click the trade button to sell your 1 contract of FTSE at 6350 (let us assume that you can see 10 contracts on the bid) if somebody else gets there before you then "sorrreee mate" you've missed the trade and will have to trade at the next price 6349 (if you can get that) and if you miss that then 6348...etc

But if you had put a buy order at the same price 6351 then of course you will be filled there and then as there will always be somebody happy to sell at your bid price.

If you convert this to the spread betting markets you can see the same effect. You will often get filled on an adverse price move because my dealers (being the market makers) are happy to take the trade (as is the case above in the FTSE futures) but if the market moves the other way (especially in times of volatility) they may reject it along the same argument as with the missed price in the example above.

My dealers were feeling very sore about this comment theme as they feel that clients do not appreciate that they work under the same constraints. As an example we had a big sell order in the FTSE and they tried to sell the futures only to miss the price twice (of course they, as with you, are not sure for a few seconds as to whether they got the trade which added to the losing move). By the time they got the hedge on the market was 4 points lower and the trade book £2000 worse off. The client still got the trade we got the loss.

This is just 'the markets'.

Of course the advantage my dealers have is that they can make a 'market' order to basically sell at the best price possible. But in general they do not like doing this. A spread betting client cannot make a 'market order' action.

Our clients can, almost, replicate a 'market' order but only via a new/limit/stop order. In these cases here CS will fill at the first tradable level open to us.

To summarize the market works the same for us as it does for our clients. Sometimes we miss the hedge sometimes clients miss the trade. Given the spreads we quote it is down to the clients skill as to whether he/she makes money. In reality whether you miss a deal by a pip or so should not invalidate the reason for the trade.

A: We have some v big punters...although our biggest online is just (!!) 300 a pip in one bet.
A: Define scalping ... difficult, because it generally means different things depending on what you are doing...for spread betting companies it generally refers to a trader who attempts to trade on lagged prices (and only lagged prices) using a bank forex feed as his 'base market'.
So my definition of a scalper is not someone who attempts to make small profits in a small period of time. It is someone who only ever trades when he can see that our price (on the LCG' platform) is marginally slower than on his Direct Market Access screen and continually takes advantage of it. I am really sorry if some clients cannot get their heads around this. Every time a client trades with us he is making a bet (and so are we) the chances of either of us winning are about 50/50 (minus the spread which is, admittedly, in our favour). If a client only ever trades when he is guaranteed a profit (i.e. in terms of horse racing, managed to place a bet after the race has already been run) at our expense why should we accept his trades? If we acted like this and only ever allowed clients to make trades when the market has already moved in our favour the regulators would be breathing down our necks and the FOS would be fining us every other week.
Nowadays it is much more difficult to do but by no means impossible. The presence of 'scalpers' is the main reason that most spread betting companies will not go fully automatic and are prone to default to 'trader confirmation' in times of stress.
The word scalper should not be confused with 'arber' who generally take positions in two similar or 'fungible' markets in the expectation of reversing both trades at a net profit in the future. Arbing (in the good old days) was very profitable in the FX markets where the cross currencies calculations often created incorrect prices..(i.e. the USD/CHF would move and the EUR/USD would move but the actual EUR/CHF may not have moved to reflect the multiple of the two)...of course now computers have removed many potential 'arb' possibilities.
No, we would not consider this scalping... scalping is when you are attempting to continuously jump on sharp price action. Because the 'quoted price' on LCG is just that, a quoted price, we cannot 'pull our price' as and when we wish...our only protection is to have a client on dealer confirm... this is the single biggest difference between spread betting and direct access as in the real exchanges there must be a counterparty on the other side to get your deal done (which means that if you want to buy there must be a seller willing to sell at that price).
Over 99% of our clients are on auto trade (not over data releases of course) if their trades are below a certain stake size (different for each market).
Editor Note: If you want to scalp you might want to consider ProSpreads which is a spread betting provider specially designed to handle day traders - note: don't even think about going this route if you have less than a year experience working with spreads.
A: Scalpers are in and out for a pip or two in a few seconds, generally before a position has any chance of being hedged. Even though we have a spectacularly fast feed it is second hand (as all spread betting feeds must be)...we get our prices from the exchanges (in the case of forex...from market makers) and then push them out to clients. This means that there will always be that fraction of a second delay from a DMA system. Effectively a scalper is watching a very good Direct Market Access and attempting to trade on the spread betting companies' fractionally retarded feed.
A scalper will buy off LCG at say 1.6305 in Cable when he knows that the price in the market is already 1.6306-1.6309 and so is taking advantage of a latency
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