Financial spread betting is spread betting on financial markets, which could be shares or indices. Spread betting is the placing of a wager on the degree of something, movement in a financial market in this case or even conceivably the number of sips of water taken by chancellor, George Osborne, during his budget speech. The gain or loss depends on the number of points of movement. An investor wishing to succeed at spread betting must have a strategy, and different strategies are available. Cantor Index is a company with a great presence in the spread betting market in the United Kingdom.
Trend following is the most popular among traders. It can be assisted by charts, where the investor will seek a market with higher highs and lows. Trend following is generally performed over a long time frame, on the basis that a trend is likely to persist.
Reversal trading, also known as contrarian trading, is also popular, and is the opposite of trend following. Here, traders are alert for markets where upward or downward trends are overextended and likely to reverse. It is difficult to successfully predict trends, but when the stratagem is successful, profits are great.
Scalping is attempting to make a profit from small price movements in a short period of time. A trader will buy and then sell as soon as there is a positive movement.
With range trading, support and resistance levels are identified. These are the levels of a market where, respectively, buying and selling will predominate and a trader will either hold or sell. Heavy losses can be avoided if a stop loss is used, which is a guaranteed exit price.
News trading depends on an appreciation of news and required an in-depth knowledge of macroeconomic data.
Pairs trading sees a trader make one up-bet and one down-bet at the same time. An example would be if a trader concentrated on the pharmaceutical sector and noticed that one stock generally traded at three times the price of another. If, one day, both stocks were at almost the same price, the trader could decide that the market had overreacted, perhaps to rumours of poor quality of one of the first firm’s drugs or concerns over the imminent departure of the finance director. If the trader is correct, shares in the first firm will rise while those in the second will fall. To succeed using this method, a trader will have to correctly realise that change is not long-term, for instance due to the actions of a regulator. Another example would be a down-bet on the FTSE 100 index and an up-bet on the Nikkei 225, if Japanese economic recovery was believed to be stronger than British.
