Financial spread betting strategies forex

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The basics of forex spread betting When placing spread bets in the forex market, you're speculating on the movements that currency pairs will make. For example, if you think the euro will increase in value against the U. Brokers offering spread betting typically quote two prices, the bid and the ask, which is called the spread. Traders then place bets on whether one currency will rise or fall against the other.

The narrower the spread is, the more attractive the currency pair is because the cost of the transaction is less. Using leverage with spread betting One of the benefits of spread betting in the forex market is being able to use leverage to place your bets. You can borrow money to place those bets, generally from the brokerage that executes the transactions. Traders must satisfy the margin requirements , which is the amount of capital needed to finance the bet, rather than the entire amount of the bet.

Unfortunately, using leverage to invest in any asset comes with more risk. Although it gives you a chance for earning even more profits on your bets than what you can afford outright, it also means you have a greater chance of losing more money than you would otherwise. When placing a spread bet, you don't actually buy or sell the currencies you are betting on. However, you will need to have money in your account in the currency in which the profit or loss will be credited or debited.

The currency will usually be the currency where the spread betting firm is located. Strategies for spread betting in forex Some of the most popular spread betting strategies used in forex investing are trend following, hedging forex, forex scalping, and news trading.

Forex scalping involves buying and selling a currency pair and only holding the position for a few seconds or minutes, taking advantage of fluctuations in the price. Scalpers use technical analysis as trading signals to decide when to place their spread bets. Central bank interventions create artificial volatility that would easily see point movements in the space of hours making forex trading more dangerous during these periods. A solution here is to tighten stops and profit targets during these periods or to use guaranteed stops to reduce the risk.

As with other financial markets made available by spread betting provider, forex currency pairs have spreads and different margin rates - the narrower spreads are usually for the more liquid forex pairs i. These include the US dollar, the world's de facto reserve currency, as well as the euro, the Japanese yen, and the British pound. Note that some pairs are more volatile than others. This is especially so for the exotic currency pairs which are less liquid than the majors and thus prone to much wilder swings.

Some exotic pairs also have significantly wider spreads compared to the majors which makes it more expensive to deal in these markets. If you are starting out it is usually best to trade single pair and learn everything about that pair don't trade too many pairs at once.

Liquidity for most forex pairs is optimal from 8am to 8pm UK time Monday through Friday, especially during the first hours of the London-New York markets overlap when the bulk of market participants are operating. This is also when prices tend to make their biggest movements and trend most making it very easy to trade. The London session is in fact one of the best times you can be trading since between 8am and 12 UK time you don't have to deal with any big economic data releases coming out of the USA and you only need to pay attention to the occasional UK or European news releases.

This in turn means that you can concentrate fully on technical analysis without any distractions. It is interesting to note that the Asian trading session tends to be a lot less volatile than the New York trading session for most major forex pairs which means that trading setups are likely to materialise more slowly. Try to avoid trading on around non-farm payroll day the first Friday of each month , unemployment figures day or on manufacturing data numbers.

This is when the least liquidity and biggest moves often occur at the same time. Huge spikes can take place during these times so trading during these periods is more akin to gambling. Of course if you're trading intra-day the story is different as news announcements are crucial to trade that momentum.

For instance if you wanted to put on a short-term play you could watch a minute price bar chart before the news announcement is made and place an order on either side of the bar's high and low. In this case you are basically saying that if it breaks the high you will buy it and put a stop at the low.

If it breaks the low you will sell and put a buy on the top side - but you really have to be quick to close the other order off With the decimation of many traditional buy and hold investors, persisting market volatility and poor or no returns from cash or treasury bonds many traders and investors are looking at alternative markets, such as the forex market.

Be warned though that although the spot or over-the-counter forex trading is growing exponentially it is still largely an unregulated market. Secondly, the skills required for trading and investing in this market are different to those in the equity market - I would say they are more akin to those used in poker.

In addition forex trading requires an understanding of probability as well as well as very tight money and risk management rules. The forex market can be quite a beast that is inherently difficult to understand with too much information, wrong and hidden or obscure information Most novice forex traders on average end up losing their money twice before finding a system which works for them.

Reasons for failure include a poor understanding of the market and its participants, the particular requirements of the forex market in terms of margin and leverage and the absence of a plan.