The Lets Compare Bets guide to financial spread betting strategies is suited to those who want to learn more technical aspects of financial spread betting. Beginners should use the navigation to the left. More experienced financial spread traders would use this guide to help them stand back and reassess your trading knowledge.
Cash or futures market
To be successful at any financial spread betting strategy one should consider spread trading psychology. The person, you and I, are the most important part of a successful financial spread betting strategy. Emotions can kill a financial spread trader. We must keep our emotions in check.
Any financial spread trader should have some form of money management in place. Financial spread betting strategies should not effect strict money management. Except in extraordinary circumstances.
The concepts covered in this guide to financial spread trading can be applied to most financial markets. Let’s see, that’s stock markets of the world, commodities, foreign exchange markets, metals, and indices.
The concepts covered here will concentrate on FTSE spread betting. That’s spread betting companies listed on the FTSE stock exchange. However, the same techniques can be applied to share index betting, and in fact, any most traded financial markets.
Decisions are hard enough at the best of times. If you feel the need to share a spread trading decision it means you are not ready to be a spread trader. Complicating decisions with other people’s opinions can make trading hellish.
So concentrate on your own analysis. Absolutely ignore everything else.
The cash market for buying shares is the one where you would by shares direct with a stock broker. With a spread betting company you can spread bet the cash price of a share. This is the price at which you could by the shares direct (not taking into account commissions etc). However, the spread betting strategy described in this guide uses share price futures markets.
Futures markets exist for loads of different assets. It could be commodities, gold, currency, a share index, or just shares. For simplicity this guide will concentrate on share futures. A futures contract is known as a ‘tradable instrument’. The term future is used because traditionally you would have taken delivery for the underlying asset at some future date.
For the purpose of financial spread betting shares you’ll never actually own the shares (or take delivery: this really applies to commodities like wheat or oil).
The futures price is directly related to the underlying cash market price. It is derived from the cash price, which is why futures contracts have also been coined ‘derivatives’. The futures price is almost always higher than the cash price. A premium is paid for the anticipation that the share price will increase over time.
With financial spread betting the trader can buy and sell futures contacts without owning them. Wow, you can buy and sell something you don’t own. This gives us double the profit potential. So why trade futures online for a good spread betting strategy?
Some of the best financial spread traders use the most simple of strategies. Simple keeps it easy. There is no point, if you are relatively new to financial spread betting, in complicating trading by using hard to understand trading tools.
For a successful spread trading strategy start by making it easy on your self. The financial spread betting strategy we describe here is designed to be easy. It is possible to make a very good income from a simple spread betting strategy.
On to the spread trading tools. Apologies if this is a little simplistic for some, but, it is the aim of this guide to help people with different backgrounds to learn a successful spread betting strategy.