Financial spread betting, which began with sports betting, has grown into a popular speculative strategy used around the world, including in online casinos. The essence of spread betting revolves around predicting the price changes of underlying assets. A spread bettor wagers on whether the asset’s value will increase or decrease. Companies offering spread betting provide spreads for specific securities. These spreads represent the difference between the selling price (ask price) and the buying price (bid price). Your investment decisions depend on your market predictions: if you expect an increase, you align with the bid price; if you foresee a drop, you go with the ask price.
Understanding trends is crucial for a spread bettor, and technical analysis plays a key role in this. Technical analysis involves studying various price and volume trends related to trading. Important indicators include the Average Directional Index, Relative Strength Index, Moving Average Convergence Divergence (MACD), and Average True Range. These indicators, extensively documented, help analyze past trends to predict future investment decisions. Technical analysis, which forecasts price changes for specific securities, is quite different from fundamental analysis. By examining price and volume data, spread bettors attempt to predict future price movements, based on the idea that historical patterns are likely to repeat. Using multiple indicators equips traders with the insights needed for predicting price shifts and potentially achieving profitable returns.
Effective investment strategies often incorporate technical indicators to generate returns, and spread betting is no exception. It relies heavily on understanding technical indicators associated with the assets or securities involved. One widely used strategy is the MACD – Moving Average Convergence Divergence strategy. This approach uses moving averages over a set period to form a trend line, helping traders decide whether to enter or exit a trade. It typically involves 12-day and 26-day exponential moving averages. The strategy utilizes a simple formula: subtracting the 26-day exponential moving average from the 12-day one indicates when to buy or sell, based on the divergences and convergences between the MACD line and the Exponential Moving Average line.
Another key indicator is the Average True Range, which gauges asset volatility by determining the difference between an asset’s daily lowest and highest values. This moving average indicator is usually evaluated over a two-week period. A low Average True Range indicates low volatility, while higher values suggest increased volatility. Spread bettors use this metric to decide the best time to initiate trades. Typically, they avoid trading in low volatility markets. Spread betting has become particularly popular in the United Kingdom, prompting increased interest in spread betting strategies. The main goal is to buy or sell assets at the most advantageous price. Although no strategy can guarantee success, technical analysis is valuable due to its reliance on historical patterns.
Brett Chatz, a graduate of the University of South Africa with majors in Economics and Strategic Management, applies his expertise at Intertrader, a well-known spread betting and CFD trading firm.