Spread Betting Tips for Trading in a Bear Market

LONDON, March 14, 2012 /PRNewswire/ --

Spread betting offers traders the potential to profit from a market that both falls, and rises; meaning from the view of the speculator, this alternative form of trading can open up opportunities to trade regardless of a market's price movement.

A market that falls 20% from its previous highest high is often referred to as a bear market, whilst a market that rises 20% from its lowest low is referred to as a bull market.

Spread betting

With all trades being leveraged through financial spread betting, you are able to trade large positions by making just a small initial deposit, often a fraction of the total trade value.

Joshua Raymond, Chief Market Strategist at City Index said: "Many traders may hold long term shares physically but may also like to mix this with some short term speculating and this is where spread betting can be tremendously flexible."

One of the key advantages of financial spread betting over conventional trading is the ability to profit from a falling market as well as a rising one; a feature which lends itself to trading in a bear market.  

Bear Market

Another important aspect of spread betting in a bear market is preparation by way of a solid trading strategy which incorporates various risk management tools.

Spread bettors who employ technical analysis and charting tend to know that bear markets commonly occur every few years, and consequently choose to keep their spread bets open.

Traders use these tools, amongst others, to try and predict when a financial market, be it a share, index, commodity or currency pair, will fall in value, and then utilise short selling through spread betting to profit from this fall.

However, by going short a market, there is the risk that should you be wrong and prices rally or rise in value, you could encounter a loss.

With this in mind, there is significant value in understanding market movements and behaviour, and this could prove invaluable when trading.

Fundamentally, if you can interpret the signs and act quickly enough to spread bet accordingly, a bear market can be just as lucrative as a bull market, if you also manage your risks.

Summary

Spread betting in a falling market allows traders to profit from any fall in price; on the basis they 'go short'. However, the risks must be fully considered, which is why a spread betting demo account could prove invaluable to new traders.

You can learn more about Spread Betting with City Index at: http://www.cityindex.co.uk/spread-betting/

Spread Betting and CFD trading are leveraged products which can result in losses greater than your initial deposit. Ensure you fully understand the risks.

About City Index:

Today more and more individual traders are discovering the benefits of derivatives, and many of them are discovering them through a City Index trading platform.

As a group, we transact in excess of 1.5 million trades every month in over 50 countries. We provide access to a wide range of instruments including margined foreign exchange, CFDs and, in the UK, financial spread betting.

We constantly look to improve the performance of our platforms and expand our range of services. The result is our customers benefit from innovative trading tools with transparent pricing, competitive spreads, and a high standard of customer support. Visit http://www.cityindex.co.uk/ for details.