Selecting the Optimum Trading Strategy for You

7strategy1050913There is no simple answer to this task as the best individual solution for you will depend on your personality and trading style. Is there a method that can help you gain some valuable insights in determining your optimum choice? One approach you can use is to study the process demonstrating how a spread betting strategy is devised. By acquiring an understanding of the components involved and their interaction may well help you in determining what could well be best suited to your own aspirations and objective. As such, this article is intended to provide you with such an overview.

One of the prime objectives of your spread betting strategy is to detect the entry and exit points for new trading opportunities that exhibit maximum potential for profit at minimum risk. To achieve this objective will require some level of dedication and effort on your behalf because the financial markets will not provide you with any easily-gained secrets generating instant success.

You will soon discover that one of your best ways forward is to design your own spread betting strategy because you will then gain an appreciation and feel for how best to trade it. Alternatively, if you purchase one then you will miss out on a serious portion of the learning curve you need to master in order to trade spread bets successfully.  You will find that many successful traders have taken it upon themselves to construct their own spread betting strategies in order to assist in the important task of identifying new quality trading opportunities.

You also need to realize that spread betting market exhibits a serious correlation with the other major ones, such as the stock market, which in turn, responds to new global economic and political developments. For instance, when the Dow Jones Industrial Average falls then the higher-yielding euro and British pound tend to decline as well against the lower-yielding US Dollar and Yen. In addition, you will find that the Stock Market rallies in response to good news while it falls when bad events occur. You can use such trading features to help you construct a good strategy.

 

Designing a Strategy

As spread betting trading strategies are normally developed using a combination of fundamental and technical analysis, you could use these studies as a basis for constructing one of your own. For instance, here is an example of a simple spread betting trading strategy:

1. Use technical analysis to detect a new trading opportunity for a spread bet using trading charts exhibiting the daily time-frame or higher. This is because the statistics associated with the longer time frames are more reliable than those of the shorter ones. For instance, you could utilize a technical indicator to advise you about the birth of a new trend when it displays a major event, such as a crossover.

2. Next seek out the opinion of a well-regarded economist in order to determine if there is any fundamental basis for the observations you have just recorded using technical analysis.

3. If so, then you may well have detected a good trading opportunity that exhibits a positive reward-to-risk ratio. As such, you should now activate a spread bet in accordance with your risk and money management strategy.

4. Wait until your exit strategy advises you to close your bet.

Please note that you are well-advised to fully test such a spread betting strategy in demo mode thoroughly before trading live.

 

The value of an Exit Strategy

Most spread betters just focus on developing strategies that can identify new trading opportunities without considering how they plan to close them proficiently. This is a mistake because an exit strategy is a vital component that is essential for your success.

You need to attain or develop a spread betting exit strategy so that you can maximize and secure your profits. One technique that you could utilize to achieve this objective is to advance your stop-loss order every time your spread bet achieves a key target. You could also attempt to move your stop-loss to your position’s breakeven point as soon as your bet allows you to do so providing total protection for your equity.

In addition, you should consider the following ideas when developing your exit strategy. Even before you enter a new spread bet, you must know where you plan to locate your stop-loss order. This action is important so that you will not experience a severe drawdown should price advance rapidly against your position. You must determine the size of your stop-loss accurately in order to restrict your potential losses but also to allow your new spread bet room to prosper.

You will discover that many successful traders base their exit strategies on a predetermined time period. This is a very effective method to utilize when major economic data is scheduled for release because these events can generate significant levels of volatility. For instance, if you anticipate that a certain reaction to a fundamental event should occur within thirty minutes after its announcement, then you could devise an exit strategy that will close your spread bet just after this time if nothing substantially materializes.

You must appreciate that you could still endure consecutive losses even after you gain an appreciation of the spread betting environment. This is because this market is capable of producing high volatility as well as very complex price patterns. You must resist the temptation to increase your number of active spread bets if you do experience a series of losses in an attempt to restore the value of your original account balance.

This is not a good idea because it could mean that you have lost concentration and could need a break from spread betting. Many experts advise that you should cease trading should you endure three straight losses or more. You must remember that there will always be many more new trading opportunities waiting for you tomorrow and onwards. Your best defense against these types of difficult problems is to acquire a good understanding of risk and money management concepts. By doing so, you can learn methods that will help you lock-in your profits and minimize your risk exposure.

 

 

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