Strategic command

People are different and have varying modus operandi when it comes to spread betting and forex market trading, but what are the main strategies punters employ?

Well, several spread betters choose to bet frequently and receive small profits with the anticipation that all of the winnings combined will make for sound returns. The important thing to remember when betting like this is to have tight stop levels. Of course this is a risky strategy to employ, because four or five winning trades can be nullified by one loss. You need nerves of steel to bet this way.

Secondly, some spread betters only trade in the quarterly contracts. Once again you have to know when you want to stop trading buying and selling. What you should be looking to do is to choose larger stop loss levels because being precise about stop loss levels with a long term view can be tricky.

Hedging a portfolio is another spread betting approach. You may have shares in a portfolio made up predominantly of shares from one index or equally performing indices. You would expect some short-term losses on it; you can employ a spread betting company to hedge this position.

What they do is sell a corresponding amount of the index making money as the market falls, while being capable of easily retaining your portfolio. You then buy out your spread bet position when you feel the index is recovering.

Finally, some traders use the policy of buying or selling one market against another. This strategy survives on the trader's conviction that one market can out perform another at a certain moment. Again, knowing whether one market has fallen enough and the other risen to its peak is the key to winning bets.