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FAQ Page 2 - Question 21

Q: Have you ever traded interest rates using spread bets?

A: Sometimes but my timing is normally off, so I either lose money or make a pittance. I used to have a trading rule way back which I still believe is valid today. However in order to make it pay, timing as ever has to be good.

The rule was this;

• In my opinion the Short Sterling (3 month UK Interest rates) contract about 9 months out is normally priced incorrectly
• The market always tends to be too optimistic or too pessimistic, ie forecasting that rates will either be a lot higher or lower than they actually will be

Money can often be made by going against the market opinion, but I used to find that if I bought today the market would either move against me or stay in a range before I got bored and took a small profit or loss. Of course was I was out of the trade the market would tend to move as I'd predicted.

Traders of interest rate movements should remember to be patient, perhaps holding a position for many months.