Financial Spread Betting Becoming More Popular – Press Release

Financial spread betting popularity set to surge over the coming years

2013 London – LS Trader announced today that they expect the popularity of financial betting to keep increasing over the coming years as more people become disillusioned with returns from mutual funds and seek to take control of their own investments and financial future by using financial betting.

There are several factors that suggest that the number of people gravitating towards financial spread betting will continue to increase and these include ease of use and instant access to their own trading platform, disillusionment with investment fund returns and the increasing levels of tax payable in the UK” said Phil Seaton of LS Trader. “A major factor is the tax free advantage that is currently in place for financial spread betting in the UK”.

People with higher incomes who have substantial investments will not be to keen to pay the new higher level of income tax at 50%, which came into effect a couple of years back. This rate is set to drop to 45% in April 2013, but it’s still a substantial part of income. One way of getting a better return on investments is not to pay any tax on your profits, which can be done in the UK with financial betting.

LS Trader Spread Betting System

Phil Seaton added “With the speed and availability of information increasing people are becoming more impatient with low returns from investments and want to see faster gains as well as increasing their own control over their money. Financial betting provides a means for people to try and outperform the various investment funds on their own. Many will struggle to do this on their own back but by taking advantage of a trading and information service such as LS Trader, the path becomes clearer and easier.”

It looks like financial betting will become increasingly popular over the coming years and this is evidenced by many more providers of spread betting coming online. This looks like a major growth area, which is set to continue for years to come, especially if UK income tax remains high, which is very likely!  People who take advantage of trading systems and information services such as LS Trader have the opportunity to not only outperform investment fund performance, but to also pay no tax on their profits under current UK tax laws.

About LS Trader

LS Trader is a leading financial spread betting information service, which provides information on 39 futures markets. The system is perhaps best known for the outstanding returns generated in 2008 where the system produced profits of 1504.1%*. The service publishes the trades exactly as and when the system indicates new trades and this includes entry and exit prices as well as portfolio selection and money management rules. In other words, it is a complete service that includes everything required for successful spread betting.

How to Use the ‘200 Day Moving Average’

The 200 day moving average is a commonly used tool amongst traders and spread bettors. Since we refer to this quite often in our updates we thought we would expand on its uses so that you can also use it in your own spread betting.

Firstly, there are two main different types of moving averages, the simple moving average (SMA) and the exponential moving average (EMA). Opinions vary as to which is the better version as both have their advantages.

Exponential moving averages

The exponential moving average is weighted towards the current prices so tends to move a bit quicker towards the current market price. Whether that is a benefit is debatable. The main benefit of the exponential moving average is that it smoothes out data spikes quicker than a simple moving average. However, that is less of a benefit in today’s age of electronic trading and reliable market data.

Simple moving averages

The simple moving average has its own advantages in that more people use it than the exponential average, especially hedge fund managers and professional traders. In a study of hedge fund managers, the 50 and 200 day simple moving averages were the most commonly used, therefore these are likely to give the best indication of what other traders are looking at over the exponential moving average.

Regular readers will know that at LS Trader we continually do extensive research on the markets and all different types of indicators, so we have of course tested both types of moving averages and all different periods. The results are perhaps surprising in that most moving averages, especially the shorter term averages used by most traders are of limited, if any value.

This is likely because the shorter term averages are too sensitive to price and are not a reliable enough indicator of a change of trend. The longer term averages, such as the 200 day simple moving average, has more of a benefit as the market tends to cross the average much slower, due to its longer term timeframe.

How to stay on the right side of the market trend

So, how can you use the 200 day moving average in your spread betting? Quite simply, it’s an at a glance measure of the longer term price trend in each market. A market with a price above the 200 day moving average is considered to be in an up trend, and markets where the price is below the 200 day moving average is considered to be in a downtrend. Therefore, a spread bettor can use this as a long term trend filter and look to only take long positions when the market is above the 200 day moving average, and look to only take short positions when the market is below the 200 day moving average.

Why would you only want to take trades in the direction of the long term trend? Simply because trades taken in the direction of the long term trend have a greater probability of success and are likely to run longer, giving them a higher profit expectation. Trades taken against the long term trend tend to be short lived, run for shorter duration and have a higher chance of whipsawing the trader out of the market.

Although the 200 day moving average is a simple at a glance indicator of the long term trend, its primary use really is to see what other traders are looking at and to see how the price action reacts when it approaches the average. Whether the moving average provides support or resistance can give clues about the views of market participants and future price moves.

At LS Trader, we use our own proprietary trend indicators, which we have found in testing to be much more reliable than the 200 day moving average, or any other technical indicator for that matter, but the 200 day moving average still has some at a glance value, even if it’s only so you can see what others are looking at and how the markets react.

We hope that has assisted your understanding of this long term trend indicator and will help your spread betting.

Good trading

Phil Seaton

You can sign up for a 30 day trial of the LS Trader System here

‘Risk On’ Versus ‘Risk Off’ in Spread Betting

If you have spent any time involved in financial spread betting over the past year or so you will have invariably come across the terms “Risk-on and Risk-off”. We mention these terms often in our LS Trader updates.

Why have these terms become so popular lately, what do they mean and how can you use this information to improve your spread betting? Since 2007 the global economy has been mostly in meltdown following the credit crisis and the stock market crash in 2008. This was a time of risk-off. In March 2009 the markets bottomed due to government stimulus and we saw a return of risk-on.

Since then the markets have switched between periods of risk-on and risk-off and this has a major impact on the global markets, including stocks, commodities, currencies and bonds, all market sectors that we trade at LS Trader.

When to go long

During risk-on periods, investors and traders are confident in the markets and are piling into markets that they think will help them generate high returns. These trades are generally considered more risky than other more conservative trades.

When the market participants go to risk on, the following markets all tend to rally at the same time:

  • Stock indices, such as the S&P 500 and Nasdaq 100
  • Commodities, such as metals and energies
  • High yielding or commodity based currencies, such as the Australian, Canadian and New Zealand dollars
  • Safer currencies such as the U.S. dollar tend to decline

When to go short

During risk-off periods, the above list can be turned on its head and all the above markets tend to sell-off, leading traders to buy into:

  • The U.S. dollar and to a lesser extent, the Swiss Franc and Japanese Yen
  • Government bonds such as 30 year U.S Treasury Bonds and T-Notes.

These two scenarios of risk-on and risk-off are also effectively linked to inflation and deflation expectations. The top list is generally indicative of inflation and the bottom list is generally indicative of deflation.

Because of the risk-on versus risk-off scenarios, most markets are all moving as one, so during risk-on, all the markets in the top list go up while all the markets in the bottom list decline, and during risk-off the opposite happens. This is easily evidenced by the prevailing market trends.

Using this information, spread bettors have a road map as to where the markets will likely be heading in the near term. The problem with this is that of late the markets have been switching frequently back and forth between the two scenarios.

This is why the trusted rules of trend following, trading with the long term trend, riding winners and cutting losses works, as by trading with the long term trend you are likely going to be on the right side of the risk-on – risk-off trade and overall market moves. You will also be in a position to run up big profits if the markets go on to develop an extended trend, and also cut losses quickly should the scenario change, leaving the bulk of your spread betting capital intact for when the market direction becomes clearer.

The LS Trader System

At LS Trader, our spread betting system automatically includes systematic rules to incorporate the above. If you are interested in finding out more about our proprietary spread betting system, the LS Trader system, please click here for a 30 day trial.

Good trading

Phil Seaton

Energy Trading – How to Spread bet the Energy Markets

Energy trading is a hot topic at present as people are very focused on energy prices and these markets are among the most popular for commodities trading. Of course it’s a very simple matter to spread bet the energy markets on any spread betting platform.

There are five main energy markets that can be traded. These are:

  • Crude oil (US)
  • Brent crude
  • Heating oil
  • No leaded gasoline
  • Natural gas

Spread betting these markets carries significant benefit over trading these energy markets via futures trading, which is beyond the scope of most due to the large contract sizes and margin requirements. However, most spread betting companies offer the above markets with spread bets of as little as 10p per point, although most are larger at around 50p. The smallest bet sizes per point I have found on these markets are at ETX Capital.

The spreads on these energy markets are generally tighter for the crude oil markets but are wider for the remaining markets. Crude oil generally has a spread of around 4 ticks, but the others are often as wide as 30 ticks.

Energy trading can be quite volatile and most of these markets have quite large average true ranges (ATR), with no leaded gasoline normally the most volatile. Therefore, even at 50p per point using an appropriate stop to take into account the expected volatility can lead to quite a large bet, so this should be taken into account before opening any trades.

Many novice traders make the mistake of opening a trade and then placing a stop loss after they have opened the trade, generally at their pain threshold, rather than taking into account the volatility and chart structure and then selecting a bet size based on these.

The correct approach is to first use a method of identifying where you would be wrong on the trade and placing your stop just beyond that price, or using a volatility based stop, and then dividing your trading capital allocated for the trade into that amount. That will give a suitable bet size per point. Trading some of these energy markets will be beyond the scope of smaller accounts.

Energy trading can be exciting and profitable and although these markets are generally volatile, they do often trend very well over the long run. At LS Trader we have had some very profitable and long running trends from these markets over the years. This includes back in 2008 when we rode Crude prices up to their all time high at $147 and then also profited from their sharp decline where they fell all the way back to $35 by being short.

According to our proprietary trend analysis at LS Trader, the long-term trends for this sector are currently up, with the exception of U.S. Crude, which is still in a downtrend.

Hopefully this has helped you with your understanding of the energy markets and energy trading.

Good trading

Phil Seaton

P.S. Find out more about the LS Trader system by clicking here

LS Trader Weekly Update 23rd July 2012

The big moves have once again come from the grains sector where a bull market is still in progress and there are a few new all time highs coming from this sector as the drought in the U.S. continues. Stocks had briefly hit new highs intra-day this week before backing off on Friday and the dollar remained mixed having recovered much of its losses for the week on Friday.

The long-term trends are still mixed for stocks and commodities but continue to favour the U.S. dollar.

Stocks

The S&P 500 initially continued with strength and posted a slight new intra-day high for the current move at 1375.7 on the September contract. The market was unable though to complete a breakout higher and fell back on Friday. The current range is therefore between last week’s high and support at 1320. The S&P 500 managed a small gain of 0.48% for the week and the long-term trend remains up.

It was a similar story for the Nasdaq 100, which having made a slight new high on Thursday also pulled back on Friday, forming a bearish engulfing pattern in the process. The Nasdaq 100 still managed a weekly advance of 1.41% in spite of Friday’s selling.

The weakest index remains the Nikkei, and following last week’s decline of 2.04%, looks to be resuming the long-term downtrend with 8260 as the next downside target on the September contract.

Commodities

Gold remains range-bound and in a sideways consolidation that suggests it is building up for a breakout. Support is still at $1547 and the long-term trend remains down.

The grains bull market continues. This past week saw Soybeans, Soybean Meal, Corn and Wheat all hit new all time highs. These trades have all been extremely profitable for the LS Trader system but how long this parabolic rise can continue for remains to be seen. Moves in grains are often very much weather driven so any sign of rain could send prices in to a sharp correction. For now the bull trends remain intact.

Feeder Cattle has been heavily sold as the steep downtrend continues in spite of a couple of days of buying mid-week.

Currencies

The dollar index had been heading lower throughout the week until a strong reversal on Friday left the index ahead by 0.12% for the week. The trend still remains up and 8400 remains the target.

The Australian dollar successfully tested and exceeded the $1.0261 target that we wrote about in the previous update and ended the week ahead by 1.54%. However, the Aussie still remains in a long-term downtrend. That may change soon if the current strength continues.

The Euro once again fell to new 2 year lows and remains on track for our target at $1.18. The next support level is at $1.21 but if that fails, $1.18 remains a distinct possibility.

Overall the long-term trend still favours the dollar against all the majors with the exception of the British Pound.

Interest rate futures

Interest rate futures continue to press higher and the 10-year T-note hit a new all time high as yields fell to record lows once again. As we have written previously there still appears to be limited upside but that could have been said for much of the past few months, but the sector has continued to rise. Yields on the 5-year notes also hit record lows and short-term 3 month Eurodollars press ever closer to par. It seems unthinkable that Eurodollars could go negative so there is certainly little upside potential in this market, something that could be said about the whole sector. This is one sector where there is an upside ceiling.

Good trading

Phil Seaton

Financial Spread Betting Is Not Executed on the Stock Market

Many UK residents have discovered the world of spread betting and it has made many citizens significant profits. Financial spread betting is a type of spread betting which focuses on the financial instruments found on the stock exchanges. These financial instruments include bonds, stocks, commodities, indices, and forex markets. Although these instruments are involved in spread betting, financial spread betting doesn’t really take part on the stock exchange.

Spread betting firms offer spreads on individual markets, and financial spread betting involves a bet being placed on this spread. No purchase of an instrument ever takes place and it is normally on the stock exchange where one would execute these purchases. Instead in financial spread betting, a trader will contact the spread betting company and place a wager on the spread. The trader will determine which direction the price of the financial instrument will move and make an appropriate buy or sell bet.

All aspects of financial spread betting are handled through the spread betting firm because no instruments are really being purchased. The spread betting firm takes the money wagered, collects losses as necessary, and deposits any profits. Therefore, in financial spread betting a trader is dealing only with the spread betting firm.

Fixed Odds Betting is a Popular Type of Financial Betting

There are three different types of financial betting for investors to participate in and the most popular of which is fixed odds betting. Fixed odds betting is the wagering of a financial instrument against odds created by a bookmaker or on a betting exchange.

In this type of financial betting, the odds are presented normally in fractional odds with the first number representing how much one could win in relation to the second number, the stake size. A fractional odd of 4/1 means a trader stands to make £400 for a wager of £100. Traders who make wagers on fixed odds are awarded the winnings plus their initial stake.

Fixed odds financial betting can be found regularly in betting on sporting events. The bookmaker presents odds on a variety of sporting events which traders then place wagers. Financial betting such as this type has been around for years even before the Internet was invented. Fixed odds is such a popular type of financial betting because of its history among sporting fans.

Financial betting is a type of gambling event which is regulated by the gaming commission and therefore many traders participate in fixed odds investing.