11 Sep | Ways to Boost your Spreadbetting Trading Results
Improve your Spreadbetting Strategy and Enjoy Increased Returns in the UK Markets
Financial Spreadbetting strategies abound on the Internet, but finding the ideal investment strategy can be a challenge. Spread bettors are a discerning group of investors. The overriding factor that separates successful spread bettors from mediocre ones is the choice of strategy that is adopted. Trading activity encompassing workable strategies has been shown to yield positive results in the long-term. It is true that the glut of financial indicators, charting tools, video guides, webinars and the like can prove highly complicated. But, with a little guidance, UK-based traders can enjoy greater levels of success in spread betting by way of usable strategies.
Simplicity and Effectiveness in Spreadbetting Strategy
Many traders – novices and intermediate level traders alike – are of the opinion that complicated spread betting strategies are the way to go. However, it is advisable to use simple moving average combinations to track at least 2 or 3 of your indicators. This is a great way to start with spreadbetting strategy. Start by learning the ins and outs of your preferred indicators and then step it up a gear once you’re ready. Start off by trading in a limited number of areas such as equities, or FX. Do your homework by researching trends in the market, understanding graphs, and watching webinars. This initial investment of time and energy will pay off handsomely over the long-term.
The use of charts is an invaluable resource in your spreadbetting strategy. Use setups to inform you of potential trades that you can make. Recall that these trending strategies will alert you to uptrends or downtrends in the market. For the purposes of illustration, an uptrend is price making a set of higher highs (or higher lows) while downtrends are the antithesis. Use charts to determine when these market movements are taking place.
Timing is Key with Spread Betting
One of the most pivotal aspects of spread betting is knowing when to enter or exit trades. Let’s take the simple example of entering a trade when the price intersects a moving average or when it bypasses the high/low of the last number of bars on a bar graph. Of course, like any good trader knows, entering a trade is simple enough, but knowing when to exit is telling. This is where the use of stop loss comes into the picture. Every time you place a financial spread bet, align yourself with stop loss alerts for all trades. Knowing precisely where to place the stop loss is dependent on the volatility of the market, percentages that you may consider relevant to your initial buy-in point (your entry point) or resistance levels that may be apparent. The UK market presents traders with many opportunities of risk/reward across multiple commodities, indices, stocks or forex combinations.
Risk Averse or Risk Seeking Profile?
Your spreadbetting strategy is wholly dependent on your appetite for risk. Owing to the fact that spread betting encompasses high levels of volatility, you may wish to limit your risk to a very low percentage. Let’s take an account size of £2,000. As a risk averse trader, you may wish to limit the amount that you willing to risk on each and every trade to just 1% of the £2,000. That translates into £20 per trade maximum. The numbers may appear low, but once you’re trading, entering and exiting trades takes place at a rate of knots – so be prepared. The best way to evaluate the actual size of your position in any one trade – let’s take commodities as an example – is by the position size per point. Say you’re purchasing Stock X at 150p. Let’s further assume that your stop loss marker is at 135p and your account size is £2,000. At 1%, that translates into £20 per trade. Your position size is thus £20 divided by (150p -135p) = £1.33 per point. Based on this, you can see why a stop loss is so important. Remember to keep your risk profile small – at 1%. This way, you can trade 100 times and even if you see 50 losing trades, you’ve still got an additional 50 trades to recover your losses and generate profits. Of all the most effective spread betting trading strategies out there, the 1% rule is golden.
Trading Technologies for Generating Exit Points
A fully comprehensive guide on spreadbetting trading strategy would be remiss without including the latest available technologies. And remember that you can easily lock in profits or reduce your risks, by selling a portion of your overall investment as the trade moves in your favour. It is possible to use trailing stops, reward to risk ratios and other highly effective technologies to assist in your overall strategy. Note that a lot of your investments will take place based on your perception, expectation or speculative analysis. If the factors leading to your initial investment have changed, how will this impact on your investment actions? These are important criteria that you should take into consideration with all financial spreadbetting actions. Always track your trading results, use spreadsheets or logs or even software to keep a record of your performance. The best way to learn is to understand what you did right and learn from your mistakes. Always give due credit to the importance of psychology in your trades. Emotional trading is risky and likely to clean you out. Greed, fear of loss and uncertainty are your biggest enemies in the UK spreadbetting arena. Now you’re ready to trade with confidence.
About the author: Brett Chatz is a graduate of the University of South Africa, and holds a Bachelor of Commerce degree, with Economics and Strategic management as his major subjects. Nowadays Brett contributes from his vast experience for the globally renowned spread betting and CFD trading provider, InterTrader.com.