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Spread Bets can easily be used to trade the differential between 2 stockmarkets
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Last update : July 2010
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| This is a common form of trading and it's called 'Spread Trading' - long in one market and short in a related one.
In the old days traders would have to conduct 2 separate trades but now many of the Spread Bet brokers offer these markets as Differential markets. The 2 main ones are -
- FTSE/Wall Street, and
- FTSE/DAX (Germany)
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What's interesting about trading spreads is that theoretically the overall direction of the market is being taken out of the equation, they are not bullish or bearish trades per se. Instead, the trader is speculating on one market outperforming the other.
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For example - If you go long the FTSE and short Wall Street it's possible to make a profit if the overall stockmarket direction is either up or down -
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- The FTSE might rally 10% and Wall Street only 5% (more profit made on the long position than lost on the short), or
- The FTSE slumps 7% and Wall Street by 11% (money lost on the long FTSE but more profit made on the short Wall Street
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| The importance of getting the right spread bet broker |
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There are good spread bet brokers and bad ones. Having a good broker won't guarantee you profits but a bad broker will probably lead to losses as a combination of their gamesmanship and suspect software takes its financial toll.
So who do I recommend? Simple, the 2 brokers I personally use for my own spread betting. Read this page for more details.
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FREE Report - How to Learn Spread Betting and Prosper
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How to build the all-important trading experience
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Where to get trading help and advice
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Which broker to use and why
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Simple 2 month training plan to follow
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Download the FREE report |
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Read more in the Spread Betting section:
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