It is well known that spread betting strategies come in many different shapes and sizes, and there is no ‘one-size-fits-all’ rule that can be applied.

The various strategies and techniques that more experienced traders implement are designed to make it easier to predict potentially profitable trades, and to make longer-term profits more achievable, yet devising a strategy in the first instance can be a difficult and time consuming process – particularly for those just starting out. Traders of all levels of experience implement trading strategies in order to introduce some routine and rules into their trading.

When should you leave a position? Should you short or go long? Where, if at all, should you set your stops? With a set strategy, you’re attempting to stack the odds in your favour in a bid to eliminate much of the guesswork, ideally paving the way for more consistent and ultimately more profitable trading. So how might a trading strategy start to take shape?

To make the process slightly easier, here is a quick look at some of the more popular spread betting strategies employed by spread traders from all walks of life to improve their chances of placing more frequent winning bets. For the complete list of spread betting strategies please refer to the menu below.

Info on Scalping

One of the most popular strategies for traders, particularly in the early stages, is known as ‘scalping’. A strategy which seeks to minimize risk, the theory behind scalping is that by closing financial spread betting positions quickly and taking small gains when they present themselves, the trader is less exposed to downwards fluctuations in price and can build up a profitable pot over time with many smaller trades.

The main advantage here is the preservation of capital – by scalping individual profits of a few PIPs as they arise, the trader is banking a profit at every turn with a view to creating a stable stream of income and increasing capital throughout a trading day with minimal downside exposure.

Obviously, the main strength of scalping is also its main weakness, and less disciplined traders may quickly get frustrated at closing positions that turn out to deliver hundreds of PIPs in favour at such an early stage. However, for the risk-averse trader, and particularly for traders that are new to the game, trading on this short-term multiple basis is a good way to get started without jeopardizing their capital amount.

Likewise, scalping requires almost constant engagement throughout the trading day if you’re looking to make any significant level of profit, constantly opening and closing positions in response to the market and incorporating the comparatively expensive trading costs of such a strategy in the process. Compared to longer term trading, this can be quite stressful, and requires a constant hands-on approach which might not be suitable for every spread bettor.

About Market Trends

Trading on market trends is another common trading strategy used by spread bettors, who jump on a market bandwagon after a combination of factors are triggered and effectively ride the wave of price movements. This takes place over the course of the trading day rather than a few minutes (as with scalping), and renders transactions costs minimal while presenting potentially wild gains.

The perfect scenario for trading on trends appears when an announcement is made or a news story breaks and the markets just begin to react to that announcement. While the first few minutes can be a volatile period, identifying the start of a price trend in either direction can give the trader a clear indicator of which position to adopt, and takes advantage of your individual dynamism over larger funds to adopt savvy but early positions. In contrast to scalping, this kind of strategy allows you to open a position slightly ahead of the rest of the market, to capitalize on the potentially significant reaction of an index price as the market moves on-trend.

Of course, this is just the second potential spread betting strategy, and there are countless others and variations that traders can implement. Ultimately, it is up to the individual trader to determine what works best for them, but devising a solid trading strategy remains a key element in profitable, consistent spread betting.

About Reversals

Reversals trading involves analyzing, with recourse to graphical performance data, the point at which a market or index is likely to reverse based on perceived over- or under-pricing. When analyzing the performance of a market over a recent period, it should become apparent as to where the upper and lower limits of the index have been. As a market or share approaches either of these limits, reversals trading strategies advise that you keep an eye on the index movement and prepare to pounce at the first sign of reversal, capitalizing on the gains made over the course of the price correction.

Reversals trading is particularly popular in that it is a reactive, low-risk strategy that doesn’t attempt to second-guess, but more moves in line with market reactions. Compared with other spread betting strategies, this means its possible to ride the wave of a price correction without having to come in ahead of time, minimizing the potential for losses whilst also reaching a happy medium in terms of the gains achievable.

About Break Outs

Trading break-outs with spread betting can be a great way to capitalize on strong price movements, and it is often possible to predict where a price is preparing to rocket through its previous boundaries. Spread bettors using this kind of strategy will wait until an index breaches its previous upper limits, usually for two or more successive days, giving an indication that the market is particularly and unprecedentedly bullish, and the price may be about to rise (similarly it can be done for a bearish market when an index (or any other asset) breaches its previous lower limits)

When trading shares through such a strategy, you would ideally position a stop loss at the pre-existing upper limit to counter the impact of a failed price break-out, but as a reactive strategy (i.e. the index is already moving favourably when the bet is placed), the downside risk is limited only to situations where the index has been overly-inflated – by which time, the trader will look to have locked in his profit and moved on to another trade.

Casting your eye over the tried and tested spread betting strategies is an important and effective way of improving your consistency and developing some structure in your trading. While it is not always possible to guarantee success through a particular strategy, or even through a combination of strategies, it’s a good idea to devise a system that works for you over the long term to deliver more frequently profitable spread trades, and to stack the odds more in your favour than with a disorganized inefficient approach.

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