Financial Spread Betting history

A phenomenon in recent years is the emergence of 'Financial Spread Betting', mainly in Europe and the UK. Financial Spread Betting is not dissimilar to ordinary trading, and the same principles you learn at day trading school are applicable - namely that you can go long or short on stocks, indices, or other instruments, but there the similarity ends. It is generally much more difficult to make money at Financial Spread Betting because the offering company loads the odds against you by using the concept of the spread. The Financial Spread Betting company makes money by quoting you a 'spread' between the bid and the ask. This spread can be absolutely immense - for example you will be lucky to find a spread smaller than 5 points on the FTSE or 10 points on the Dow Jones. The Financial Spread Betting company explains that this is because they don't charge any commission or fees, and winning can be tax free (in the UK at least).

Problem is, the moment you enter a FTSE trade, for example, you are immediately underwater to the tune of the spread (eg 5 points) multiplied by the number of pounds (or dollars) per point you are Spread Betting with. Win or lose, they make that amount of money. You, on the other hand, face an uphill struggle even to reach break even. Say you go long the Dow at 8895 at £10 per point. If you wanted to immediately close that position, you would need to create an identical balancing short, but the best price they will now offer you is what you bought at less the spread - i.e. 8885. The trade cost you £100 (assuming the market didn't move), and that is actually rather an expensive commission rate!.

One piece of advice we can offer you is this - ignore the spread when deciding whether to close the trade. If the spread is large, it can effectively reduce your stop loss to a miniscule amount, meaning you will get stopped out all the time. Regard the spread as your 'dealing costs' instead. If you can make money with a Financial Spread Betting firm under these conditions, you will probably be able to make a LOT more with a real trading account!

Financial Spread Betting Tips

What does this mean for a Financial Spread Betting investor like yourself? Simple. If you pay the spread whether you win or lose, you need to increase your percentage of winning trades. Usually, traders balance the number of winning trades they are happy with against the average profit (or loss) per trade. That way, even a 50% average win ratio will make money, if the average winner is larger than the average loser. With Financial Spread Betting, however, this equation becomes skewed, and you need rather more winning trades, even if the average win size goes down a little. This is why Camarilla is so perfect for Financial Spread Betting - the percentage of winning trades is quite high, historically, meaning that the number of occassions when the Financial Spread Betting company adds insult to injury by adding their spread to your loss is actually small.Camarilla gives you a very low risk entry point, and sensible targets to take profits, meaning that even a 10 point move on the Dow, for example, becomes a tradeable move for a Financial Spread Better.

Financial Spread Betting on Stocks

Does Camarilla work on the individual stocks? Of course. Study this example from 21st May 2003:-

The 'LONG' level was available to you the day before thanks to the Camarilla {b} Equation, as were the profit targets. That is a 30 point Financial Spread Betting move. If you had that information the day before, do you think you would have been up early on the day, ready for a Financial Spread Betting rip roaring profit taking day?

Yep. So would we.