FTSE Spread Betting
FTSE Spread Betting
FTSE spread betting is one of the most popular forms of trading the UK index and is available from almost all spread betting brokers. The FTSE is particularly popular to spread trade due to the fact that that it always has very tight spreads which are usually around 1 pip. Spread betting on the FTSE100 is predicting which direction the UK’s top 100 companies are going to move, on aggregate. Similarly spread trading the FTSE250 and 350 simply increases the market of companies that you are including in your bet. The indices individually track these markets which are priced in points, making it an incredibly simple format of spread trading.
Spread Betting on the FTSE: Going Long on the FTSE
Let’s suppose that a spread betting provider is quoting the UK 100 Rolling Bet spread at 5820/5821 – which represent the ‘sell’ and ‘buy’ price. You think the FTSE 100 is about to rise over the next few days so you open a buy position (go long) of £10 per point at 5821.
In the next few days, the FTSE 100 rises following the release of upbeat UK economic data and the spread betting provider is now quoting the UK 100 rolling bet price is now at 5860/5861. Having managed to make a sizable gain, you decide to cash in your winningsby selling £10 per point at 5860. This represents a 39-point movement in your favour netting you a tax-free gain of £390. Of course had you predicted the direction wrong and the UK 100 were to fall 39 points to 5782 – you would have made a loss of £390.
Spread Betting on the FTSE: Going Short on the FTSE
Continuing with our example, let’s suppose that you believe that the FTSE 100 has rose too much in a short period and that a correction is due so you open a ‘sell’ spread bet of £10 per point at 5820.
A few weeks after, following the release of poor sector company earnings, the FTSE 100 goes down and the latest UK 100 rolling bet price is now 5790/5791. You decide to close your position by buying back £10 per point at 5791 (the latest buy price). This nets you a profit of f £290 [(5820 – 5791) x £10). However, had your opinion been wrong and the price of the UK 100 rose to 5849, you’d have lost £290.
Factors which affect FTSE spread trading are important to know before placing a bet on the FTSE are any forthcoming fundamental news events. Since the FTSE indices are groups of companies they reflect the general, underlying sentiment of the market rather than on individual performance or earnings result. Big news events such as interest rate decisions, currency movements and GDP results will affect the market as a whole and determine whether it moves up or down over the course of the day. Spread trading the FTSE requires a bit of knowledge about what daily news is scheduled for release as well as keeping an eye on factors which could affect the economic sentiment of investors in the companies which make up the index.
FTSE spread betting can involve several different techniques depending on the type of trader and how much time you may want to keep a bet open. Many traders trade the FTSE during the morning session when the stock markets open and react to the close of both the US Dow Jones market and also the Asian markets which operate in the time between the FTSE closing and reopening. FTSE spread betting at the start of the day can be both volatile and profitable. Often the index will open with many individual traders buying and selling the shares of individual companies for a multitude of reasons.
The FTSE index will simply create a general impression on whether there would be more buyers than sellers in the market as a whole and move up or down accordingly. Spread trading the FTSE can often be very rewarding during this morning period as the market often swings in one direction once it has established the general mood of traders. As you would expected this creates many opportunities to spread bet the FTSE index using technical analysis or simply fundamental analysis techniques. Due to the fact that the FTSE index is comprised of 100, 200 or 350 individual companies it will experience pull-backs from any price movement that it achieves as individual investors take profits in the underlying market.
Many FTSE spread betting professionals say that the best time to trade the index are when liquidity and volatility are at their highest. This obviously occurs in the morning when most professional traders are at their desks and also in the afternoon during the opening of the Dow Jones index and during the closing half an hour when traders decide whether to hold their positions overnight or not. Due to the fact that the FTSE will largely follow the trends and patterns of the Dow Jones once it has opened, many find it more exciting to trade during the morning when the other influential European markets such as the German DAX and the French CAC open shortly after the London stock exchange. FTSE spread betting is very much about events and timing, its success is also about which strategy you employ to trade this index.
Some strategies for trading the FTSE include morning breakout trading where investors try to catch the first swing of the day. This is often quite a powerful move as it is a combination of FTSE spread traders jumping into the trade and those that chose the wrong direction trying to get out of their position. This combination of opening longs and closing shorts gives most indices a boost in one direction or another and creates lots of opportunities for successful FTSE spread betting.
Other strategies are to use pure technical analysis and price-action techniques to base your FTSE spread trading decisions. This can be looking for both chart patterns as with any other financial chart or finding key areas of support and resistance, such as daily pivot points, which many use to spread betting the FTSE. Candlestick trading is also particularly effective for trading indices in combination with support and resistance or pivot point trading. Looking for particularly clear candlestick patterns at these key levels can be a very successful method in trading during the times most conducive with active FTSE spread betting.
My interpretation of FTSE is as follows:
Historically, the tops of FTSE up trends are never single spikes, they are virtually always re-tested and most tops are double tops. This would suggest that if the “top” is in, then there will be a retest which will give longs a chance to exit and shorts a chance to enter.
Obviously major fundamental shifts can nullify this, however, other than short term intraday trades, I’ll probably not attempt any longer term short positions until we see a double top.
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Since the spread betting markets are worldwide and various for the different clients, you can find many different options to start with. The simple fact that you do not buy or sell anything actually, makes it even larger than any other online market you can find. Among the opportunities for the new users and the old time ones, among the Nasdaq, Sports spreads, Oil, commodities, Futures and others, you can find the ftse spread betting when the most popular is the UK ftse spread betting.
The ftse spread betting (Financial Times and Stock Exchange) is a popular spreads to bet on since its very dynamic market. You can find the details of the ftse 100 spread betting online as well as the ftse 250 spread betting statistics. The options in the UK ftse spread betting are endless since when the market is opening, there is a public estimation for the Futures to open on the market.
So you are interested in spread betting on the ftse, the best place to do so in of course with your favorite spread betting company, make sure it have the open opportunity for you to UK ftse spread betting:
FTSE 100: this is the market index for the UK top 100 companies. The rank made by the market capitalization and presented to the traders as well as to the spread betting companies. Sometimes you can find this index in the name of UK100.
FTSE 250: Also known as the FTSE MID250, this is the index of the next 250 top companies in the UK stocks market,after the first 100 listed in the UK100.
The spread bets on the FTSE indexes is popular since the UK residents already know to the UK market and it’s easy for them to predict the market movements. For UK resident, the ftse spread betting is open and the numbers re shown in the daily newspapers. It’s simple to believe that the FTSE market will go sown and to sell with the spread bet of 10 GBP or more, if you were right and the market went down, the money you invested multiply with the stake you took is your revenue.
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Have you ever had a hunch that the price of gold is going to continue rising in the near future, or the dollar will fall further, and been ready to back it with your own money? If so, spread trading may be the thing for you.
By utilising leverage, private investors are able to take a large financial exposure with only a small deposit, borrowing the rest from a spread trading provider. Trading on margin using spreads trading requires less cash than the equivalent share purchase, yet you are still exposed to the same absolute profit and loss. Leveraging your capital like this can either work for you or against you but only those who are clear about what they are trying to achieve are likely to come out on top.
For instance, if you expected the FTSE 100 to decline over the next week or so, you could open a ‘sell’ position of £10 per point at 5500. This means that for every point by which the FTSE 100 fell, you would stand to make a profit of £10. Therefore, if the FTSE 100 were to fall to 5420/5421 on the back of the Greek debt crisis, you could cash in your gains by buying back £10 per point at 5421 (the buy price) – which amounts to a tax free profit of £790. If however, the price of the FTSE 100 rose to 5550, you would have lost £500 (5550 -5500 x £10).
Spread trading now covers a very wide range of markets, which allow traders and investors to take almost any position in foreign exchange, stocks or commodities, and indices covering any of these securities.
An Example of How Profits are Made in Spread Trading
We will now go through with you an example of how profits are made in spread trading. In this example the FTSE 100 is being traded , which is the index of the 100 largest shares in the UK. Say that the FTSE 100 is at a level of 5000. You believe that the FTSE 100 is going to go downwards from this point. Therefore you place a ‘down’ bet. You decide on a stake size of say £10 per point for your trade (you could of course though bet with a stake value of pennies per point, if you wished to do so).
The FTSE 100 then drops to a level of 4800 and following the techniques you exit your bet at this point. You make a total profit of 200 points. This is because this is the difference between the original value of the FTSE 100 at 5000 and the value the trade was exited on of 4800. Therefore, the profit you make for this trade is 200 points x £10 = £2000. In summary:
Stake placed = £10 per point
‘Down’ bet placed at 5000 price
Bet exited at 4800 price
Point made = 200
Tax-free profit = stake value x points made
Therefore, your tax-free profit = £10 x 200 = £2000.