Spread betting strategies ftse 100 chart
I only place a trade on instruments I understand inside out - the FTSE in this case and if I have any doubt that the trade won't eventually make me money I don't place the trade. I trade March contract which expire 21 Mar. To me the "risk" is worth taking to attract that level of return. Having said this spread betting need not be high risk - in fact it can be no risk, with this rather simple technique which I shall explain here: It's based on two hard facts.
One: stock markets rise over time - a chart of the FTSE since it began shows a parabolic rising line with the bear markets appearing as short blips. A long position entered at any time will eventually move into profit, whereas a short position may never come back to you. And two: individual stocks can go bust and become worthless, but an index never can - dogs of the FTSE index get replaced periodically by better performers.
Therefore, a long position on an index is the safest bet you can make, so long as you have the funds in the account to cover a potentially large move against you before it comes good. I don't consider that more prudent than active trading with stops and reassessments. Us day traders will step back and review after 20, 50, points. You are going to stick it out and leverage up for FTSE points.
In it took well into the 's to hit the same levels. Not saying we are there now, but there are no certain bets Longer term trading or investing has to take into account inflation. Short term trading doesn't. I'm still amazed how some people who work in the city still don't understand the ravages of inflation.
It is false to assume that spread betting is easy money, better to have clear entry and exit strategy and look into making modest profits perhaps 50 points , and know when to cash out. When you say 'hedging' is that like a short term bet against losses elsewhere, by betting on the opposite?
Like hedging bets? A: Sort of yes. I personally think that spreadbetting can have a place as an investment tool as well as for 'speculation'. You certainly need to be aware of the difference in charges but a lot of it also comes down to mindset.
If you can convince yourself that holding a spreadbet is just another way of buying the shares then you can use it in a more classical investment rather than speculation. Certainly spreadbet charges are generally higher and you pay interest over time, but there are other counteracting benefits.
You can more easily leverage careful if you wish to. You avoid tax as legislation currently stands on gains. You DO still get the benefit of dividends. In certain circumstances you can use spread betting to defer CGT with your 'ordinary' share positions. Imagine you want to sell some shares because you think they are now pricey.
But you've used up your CGT allowance for the year. You also have to decide the amount you want to stake on your spread bet. The amount of your stake will determine how much of the underlying asset you are trading and therefore how much margin is required for your spread bet.
Your profit or loss in points on a spread bet trade will be multiplied by your stake amount. The margin requirement The formula for calculating your margin requirement is as follows: Notional value of the asset x the required margin percentage Keep in mind that you must have enough trading capital in your account to cover the required margin, and also to be able to withstand the market even temporarily moving against your position.
The price quoted is If you went ahead and placed the trade, then you would buy at the asking price of In order for your spread bet to be profitable, the bid price — the lower price in the spread — must rise above You will need to make sure you have sufficient cleared funds on deposit with the broker to place this trade. You normally get a confirmation through from the broker almost immediately confirming the trade has been placed.
When you check back into your account the following morning you see a funding charge of 6 pence. You open up a deal ticket and see the price quoted is
ALPARI ONLINE FOREX TRADING
If the FTSE index began to drop then you might choose to close your spread bet in order to restrict your losses. Should the market pull back to This quick example shows how the Stop Loss works and also how your upside is unlimited. This means an investor can spread bet on the UK market: Falling below So, if you continue with the above spread of As a result, if after a few sessions the UK stock market started to move upwards then you could choose to close your trade in order to guarantee your profit.
So if the market moved up then the spread might change to You would close your position by selling at In this case, you wanted the UK index to rise. Nevertheless, it might decrease. So if the spread fell to Spread traders trade in pips and as such moves in indices are substantially amplified. Since then the make-up of the index has changed enormously — mergers and bankruptcies have meant the index only has 21 of the original constituents are left in it.
The largest of the survivors is BP, although a fair number of constituents have changed their names too. Changes In The Constituents The process for reviewing the constituents in the index is straightforward. All companies listed on the LSE are ranked in order of their market capitalisation. A committee made up of independent market experts meets in March, June, September and December and considers which companies should be allowed into the FTSE and which should be dropped.
However they are still worth watching out for as it helps to understand the index you are trading. It is important to note that the FTSE is heavily exposed to mining shares so you have to keep an eye on that particular sector. What To Watch Out For When Trading A massive range of factors can push the FTSE price up or down — but they tend to fall into the following categories: Interest rate news: most Bank Of England interest rate changes are well-flagged, but the monthly interest rate meetings usually at 12pm on a Thursday near the beginning of the month are still worth watching out for.
So too are the minutes from these minutes, which are published on a Wednesday morning two weeks after the meeting. These can give clues as to when the next interest rate change might be, and what might be happening with other Bank Of England activities such as Quantitative Easing. Economic Indicators: almost any economic indicator has the potential to surprise and hence to move the markets.
So the impact of the news will, of course, depend on the importance of that news item and the size of the company s spread bet trading calendarit relates to. News items, by their nature, are unpredictable. However pay special attention to times when news about a company is likely to occur — e. Technical Adjustments: many shares in the FTSE pay dividends, and in doing so they transfer some of their wealth from their bank account into that of their customers. Hence their value falls, their share price falls and consequently the value of the FTSE will fall.
If you have a position open while stocks are going ex-div, the results will be broadly neutral. A long position, for example, will suffer from the value of the FTSE falling but there will be a corresponding dividend adjustment paid into your account. Similarly those holding a short position will benefit from the fall in the FTSE price but will see a dividend payment leaving their account. However do look out for your stop loss orders and profit orders. If these orders are coming close to being executed, a dividend payment overnight may just cause them to be executed.
The largest company in the FTSE that could properly be described as a British is Tesco, and even the supermarket behemoth is increasingly exposed to international markets. In the past the FTSE might have been a good way to play a UK recovery but this is simply no longer true; the index is today dominated by global commodities and financial services enterprises, whose earnings are predominantly international in nature.
For example the FTSE currently has 11 miners in it; all of their share price are hugely affected by what goes on in China. My point here is that when trading the FTSE you need to keep an eye on what is driving the larger underlying components. The FTSE consists of companies, of which 10 make up about 45 per cent of the index value. The German Dax consists of 30 stocks, representing the creme-de-la-creme of German commerce and industry. Together, they are considered the two leading stock indices in Europe.
I realised that there is a statistical correlation between the two stock indices significant enough to bet on. Why the FTSE? Good question as there are so many other things to trade, and the trade setups that we take do apply to other markets, but some traders find Indexes easier to trader compared to Forex.
If you take time to work it all out then yes you can do really well out of Forex pip for pip def more than the Indexes, but the learning period is def longer and harder as you have to develop a six sense as to what the big banks are up 2. You also need and this is where most new trades blow even more money to know about cross currency analysis and yes once you understand how that works you can make money.
It is my thought that this offers the new trader the best chance of learning trading basics and then yes once you learn your own rules you can trade anything you like. Spread Betting the FTSE Practicalities The FTSE index benchmark can be stagnant for months moving in a range of maybe 40 or 50 points but in turbulent market conditions it can move by over points in a single trading session. You can spread bet the FTSE using either the daily rolling bets or futures. Daily bets are more suitable for short-term trades and comes with very tight spreads — typically at just 1 point.
As the name suggests daily rolling bets can be rolled over from one trading day to the next, subject to a small financing charge each time this happens. Longer term trading views can be taken using the quarterly stock index futures. The spread for futures is wider but these contracts do not incur daily financing charges.
Initial margins usually work out to around 40 times the stake for both FTSE daily bets and futures. If you are considering a medium or long term trade you will need to utilise fairly wide stops to take account of the day-to-day market fluctuations.
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