Two (2) of the most common financial spread betting strategies are the momentum trading and pairs trading. It is in this light that traders need to be aware of these strategies so that they will be able to decide which one is appropriate to use. Of course, there is no "once size fits all" strategy that can be applicable to all instances and events of the market. In other words, there is an even when it is advantageous to employ while there is also an event that it is inappropriate.
It is in this regard that this article will explain both of these strategies briefly in the sections below.
Momentum Trading
On the one hand, momentum trading is a strategy in financial spread betting that involves monitoring the direction of all the traders in the market. The key here is to bet on how those traders will pull their prices. For instances, what this means is that when traders see the rest buying positions and trades in a certain stock, riding that momentum is the right thing to do. In other words, what this requires from a trader is to trade on a position until the momentum is noticeably slowing down. Hence, before the trade totally drops, a trader must get out to that position fast.
However, there is a catch to this. In order for a trader to do this properly, appropriate and reliable data should be available and present. The sets of the market and economic data that a trader needs to look into should be those for intermediate level. This is in order for the prediction and monitoring to be precise.
Pairs Trading
On the other hand, another strategy that is applicable in financial spread betting is the pairs trading. This is about trading in two (2) companies within the same market or sector at the same time. For traders to profit from this strategy, they must buy trades or positions to a company that is performing stronger while selling the one that is currently performing weaker than the other. However, the premise behind this is that it may only work effectively when the sector is getting stronger or performing positively. If the market is on the opposite, then what the trader needs to do is the reverse.
The idea of this strategy is quite straightforward. For instance, if a sector or a position is, in fact, worth more of a trader's attention, then it should receive more. In other words, this requires the trader to buy more on the company that is moving positively stronger rather than those that are weaker. Hence, this gives the traders to win and gain from both bets instead of profiting from just one.
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