Published On: Sat, Nov 20th, 2010

Combining Strategies When Spread Betting

In this series of tutorials, we have outlined most of the critical aspects of spread betting trading.  Perhaps surprisingly, many of these factors are psychological and mathematical (rather than purely financial) in nature.  Because of this, it should be understood that achieving success when spread betting is a varied process that requires traders to utilize a wide variety of skills and any reluctance to accept these requirements are likely to lead to unnecessary losses down the line.

In this series, a variety of spread betting strategies have been presented and each of these strategies has its own individual strengths that can be applied to its appropriate market environment.  To conclude and summarize this series, we will look at why traders should combine strategies and methods in order to enhance chances of success so that money is not put at risk unnecessarily and so that gains can be generated consistently over the long term.

Combining Fundamental Analysis with Technical Analysis

Fundamental analysis has been successfully used for hundreds of years, and its strengths are clear:  Investors are able to accurately understand the main drivers influencing the economy, Investors will be prepared when major financial news and economic releases are made public, and traders will have a broad sense of why market sentiment is the way it is at any given moment.  All of these strength are critical when making trading decisions.  Without knowledge like this, investors become gamblers, as probabilities are no better than a simple coin toss.

Technical analysis, however, offers some alternative strengths:  Traders get objective assessments of price history, mathematical indicators and tools can be used to augment human analysis of price, and traders are able to forecast future price movements by gauging the overall momentum seen in the market.  Because of these strengths, traders are able to determine highly accurate entry and exit levels when constructing new trade ideas.

The Main Task of a Spread Betting Trader

But what should be understood at this stage is that while most traders will associate themselves with one strategy over another, there is absolutely no reason why elements of both forms of analysis cannot be used in conjunction with one another, and trading signals that are in agreement and taken from both sides can provide traders with opportunities that are much less likely to result in trading losses.

This, of course, is our main task as a spread betting investor and when the process is approached in this fashion, it is much easier to keep a trading account viable and profitable over the long term.

Creating Success Using All Available Resources

So before any real money is put at risk, traders must have an understanding of the correct approach and psychological mindset.  This includes starting this business with realistic expectations and implementing sound money management strategies so that your full trading account is not depleted even before you really get started as a trader.

Unfortunately, this is an all too common occurrence but when we begin with a conservative approach and obey our original trading rules (rather than making decisions based on emotional or irrational responses), the real market analysis can begin and active trades can be established.   In order to truly step up your game and outperform the rest of the market, you will need to implement all of your knowledge and use all of the strategy tools available.

Without this, you will be taking unnecessary risks and you would probably be better off having someone else invest your money for you.  Luckily, successful spread betting is a very achievable process and if you are willing to take the time to learn the basics and to conduct your daily market analysis (both technical and fundamental) you are already ahead of those that are approaching spread betting as a get rich quick scheme (which, of course, it isn’t).  In this case, you have already started on the road to success and with a methodical approach, this can most assuredly continue over the long term.

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About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.