The Best Spread Betting Strategies in 2022 – InvestingReviews.co.uk | Jewelry Dukan

What Are Different Spread Betting Strategies?

There are various trading strategies that can be used when spread betting. Most of them try to predict small market moves by using leverage to increase margin.

Before you start spread betting, it is important to understand the different spread betting strategies available and the risks involved.

The strategy someone chooses usually depends on that trader’s preferences. One strategy is not necessarily better than the other, and neither guarantees success.

Learn more about five spread betting strategies below.

1. Trending Market Spread Betting

In trend market spread betting, bets are placed by identifying patterns and trends in the market.

A trending market is a market where price action is in a discernible uptrend or downtrend. This would normally involve price making “higher highs” and “lower lows” to form an uptrend and the opposite for downtrends.

This allows traders to speculate on their own when a reaction might occur based on the trend. For example, at the bottom of the trend or when a lower low is forming, this could mean an opportunity to open a long position.

Because according to the trend, the next reaction could be an upward movement. Otherwise the trend is broken.

Investors might be drawn to trending market spread bets as they often allow you to follow the dynamics of the market rather than bet against it.

Some traders like to use technical indicators to let them know when movements will start or end.

Trending market spread betting can be applied to bearish or bullish markets, meaning you can potentially use this strategy regardless of what’s going on in the overall economy.

2. Reversal Spread Betting

Trend reversal betting involves speculating when a defined movement changes sharply in one direction.

A reversal occurs when a market has reached a key price point after a defined or prolonged move up or down. The reversal move itself occurs when an asset price reacts strongly to a significant level and triggers a strong move in the opposite direction.

A trend reversal can be either bullish or bearish. For example, after a strong move higher, a trader may speculate that a reversal to the downside might occur. Likewise, an upward reversal could occur in response to a downward move in price.

However, there can be “retracements” within these prolonged moves that precede a reversal. These are short lived reversals that could be mistaken for a real price reversal. Mistaking a retracement for a reversal pattern could result in entering a trade too early as the market continues to follow its original momentum.

A useful technique might be to use key reversal “candlestick” patterns to spot when a reversal is likely. Price movements are sometimes represented as “candles” to visualize how much the price is moving over a given period of time. Certain configurations of these candles could indicate when the market is about to reverse.

Other types of fundamental and technical analysis can help identify these moves, such as: B. Tracking volume at key levels.

Reversal spread betting could be viewed as potentially more risky than other strategies as you need to predict a shift in market dynamics.

For example, indicators that suggest a market has peaked could be a good time to open a short spread betting position. Opening this trade at the very beginning of a move down from its peak could result in the potential for bigger gains as you have a position to ride out the entire move down.

Of course, this also means that opening the trade at the wrong time will expose you to bigger losses.

3. Breakout Spread Betting

When a market is rangebound, the upper and lower levels of the range act as key price points, or “support” and “resistance” levels – that is, when an asset price is expected to rise to its upper level. Once a market reaches one of these levels, traders can start considering a breakout trade.

Here the price breaks above or below its previously defined range. To make the most of these breakout moves, traders will often enter at key range levels as early as possible to maximize returns.

You could use indicators to inform when a breakout is likely, including volume indicators to spot increased volume at key price points. This could prevent you from entering a trade before a range can be broken.

Staggering entry positions is another technique that might be used by people trying to use breakout trading strategies. You could use limit orders to move your entries around the key price point at the top or bottom of a range rather than buying at the market price. These automatically open a position once the asset reaches a predetermined price.

It has the potential to prevent you from missing a position by locking in an entry point at the wrong price and spreading your entry over a larger price range.

However, you should keep in mind that judging an entry point is difficult and may result in your trade hitting a stop loss or your position being liquidated.

4. Consolidation of market spread betting

Consolidating market spread betting is a way of trading an asset’s price movement between two historical levels – one high and one lower.

The price “jumps” between two levels and bettors using this strategy aim to trade the move up or down while doing so.

A consolidating market exhibits consistent movement between support and resistance levels. For example, an asset price is expected to rise to its upper level – known as “resistance” – along the low levels of consolidation.

Some traders find it useful to trade the price movements within the consolidation range, this method defining the consolidation market strategy. It could also provide a visible stop-loss point if the consolidation range is breached.

For example, price resting at the low of a consolidating range that has consistently reacted positively from this support could be a good position to open a long spread betting position.

Because these respective movements are relatively small, leverage is commonly used to scalp between the regions. Leverage is a way to increase the size of your position without using additional funds. You can read more about leverage later in my guide.

Indicators could provide a way to see when to exit your trade, which may be when the price is nearing the highs or lows of the range.

5. News based spread betting

News-based spread betting is a strategy that uses market-related news or events to inform a trading position.

This strategy uses news and economic events to inform traders of specific market movements. Typically, investors use this technique to target global markets because news travels quickly and the news is more likely to affect a larger number of shareholders.

This is because the more investors affected, the more likely it is to push a market in a certain direction. For example, more people selling might lower prices faster than fewer people selling.

News based spread bettors look for news and economic events that could affect the financial markets. They try to respond to the news as quickly as possible to maximize potential profits.

A negative story about a particular publicly traded company could cause its stock price to fall. Likewise, a story of positive news about a financial market could send prices higher.

Hypothetically, the announcement that Coca-Cola has life-extending properties would be seen as beneficial to the Coca-Cola brand by investors. As a result, the price of its shares would likely increase. A trader would aim to enter a long trade in Coca-Cola stock as soon as possible after the news broke, hoping for an appreciation in their share price.

Similarly, economic or financial events could affect prices in the same way as news reports. Events such as changes in fiscal policy, committee meetings, or the release of a company’s earnings report can all affect a market’s price.

However, this technique could make it difficult to determine when to take profits or cut losses. This is because the strategy does not involve technical analysis, so it can be difficult to know when the move will end.

What is spread betting?

Spread betting is a way of trading without ever owning the underlying asset. Instead, traders speculate on the future price movements of a market. This style of investing often uses technical analysis to help traders identify when to open or close a particular trade.

The process of spread betting involves placing a certain amount of money per point of movement in a certain direction. This movement is then multiplied by the leverage if you have opted for leverage with your broker.

Spread betting trading is usually done over short-term timeframes, often due to the way leverage amplifies price movements.

Leverage multiplies price movements – both profits and losses are magnified according to your margin. It is important to note before you start spread betting that most retail investor accounts will lose money trading this way.

Therefore, it is important to cut losses or take profits before the market moves in the other direction. Spread betting usually comes with added volatility as price movements can change the profitability of a trade very quickly.

There are different spread betting strategies and some may suit certain traders better than others. There is no “right” way to spread the bet as it simply depends on the trader’s preferences and risk tolerance.

Due to the high level of risk associated with leveraged trading methods, a majority of traders lose money when spread betting and there is a high risk of losing money quickly.

Make sure you fully understand these risks before you start trading.

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