A bear market doesn’t always have to signify losses. Spread betting allows you to profit even when markets are falling, by letting you take short positions.
All you have to do is decide whether the market is headed up or down and then either 'buy' or 'sell' an instrument accordingly.
Global markets have weakened badly this week on fears of a US recession. On Monday 21 January the FTSE 100 fell by 323.5 points, marking a 5.48% loss in a single day, while in Japan the Nikkei 225 saw its worst two-day decline in nearly two decades, losing more than 5.65% and falling below the 13000 mark for the first time since September 2005.
Unlike conventional trading, spread betting gives you a quick and simple way to capitalise on such downward trends. So, if you feel the continued outlook for the FTSE 100 is poor, you might choose to 'sell' our March FTSE 100 bet at £5/point. Say we are quoting 5701 - 5707 when you open the trade, and by the time you close your position the price has fallen to 5539 - 5545. You would stand to make 5701 (your opening 'sell' price) minus 5545 (your closing 'buy' price) = 156 x £5/point = £780.
Of course, if the market surprised you by turning upwards, the same trade could turn an equal or greater loss.
Limit your risk
To limit your risk you might like to consider placing a Guaranteed Stop on your position. With Guaranteed Stops, you specify a level at which you want your bet to be closed, should the market move against you. We then guarantee that your position would be closed at this level, even if the price gaps suddenly.
For a detailed example of a short trade, see our Daily FTSE Example
For more information on Guaranteed Stops, see our Risk Management pages.
A bear market doesn’t always have to signify losses. Spread betting allows you to profit even when markets are falling, by letting you take short positions.
All you have to do is decide whether the market is headed up or down and then either 'buy' or 'sell' an instrument accordingly.
Global markets have weakened badly this week on fears of a US recession. On Monday 21 January the FTSE 100 fell by 323.5 points, marking a 5.48% loss in a single day, while in Japan the Nikkei 225 saw its worst two-day decline in nearly two decades, losing more than 5.65% and falling below the 13000 mark for the first time since September 2005.
Unlike conventional trading, spread betting gives you a quick and simple way to capitalise on such downward trends. So, if you feel the continued outlook for the FTSE 100 is poor, you might choose to 'sell' our March FTSE 100 bet at £5/point. Say we are quoting 5701 - 5707 when you open the trade, and by the time you close your position the price has fallen to 5539 - 5545. You would stand to make 5701 (your opening 'sell' price) minus 5545 (your closing 'buy' price) = 156 x £5/point = £780.
Of course, if the market surprised you by turning upwards, the same trade could turn an equal or greater loss.
Limit your risk
To limit your risk you might like to consider placing a Guaranteed Stop on your position. With Guaranteed Stops, you specify a level at which you want your bet to be closed, should the market move against you. We then guarantee that your position would be closed at this level, even if the price gaps suddenly.
For a detailed example of a short trade, see our Daily FTSE Example
For more information on Guaranteed Stops, see our Risk Management pages.
http://img293.imageshack.us/img293/4871/shortlz5.th.gif
© 2008 IG Index UK