Discover Spread Betting Strategies

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Before you understand what a spread is you should first forex spread trading strategies all understand that in the foreign exchange market prices are represented as currency pairs or exchange rate quotation where the relative value of one currency unit is denominated in the units of another currency. An exchange rate, applied to a customer willing to purchase forex spread trading strategies quote currency is called BID.

It is the highest price that a currency pair will be forex spread trading strategies. And a price of quote currency selling is called ASK. It represents brokerage service costs and replaces transactions fees. Spread is traditionally denoted in pips — a percentage in point, meaning fourth decimal place in currency quotation. Following types of spreads are used in Forex Trading. Fixed spreads are set by dealing companies for automatically traded accounts. Fixed spread with an extension — certain part of a spread is predetermined and another part may be adjusted by a dealer according to market.

Variable spread — fluctuates in correlation with market conditions. Generally variable spread is low during times of market inactivity approximately pipsbut during volatile market can actually widen to as much as pips. This type of spread is closer to real market but brings higher uncertainty to trade and makes creation of effective strategy more difficult.

Observing variable spread graph trader could define moments when value of the spread reaches its extremes — either maximum or minimum. On the moment of minimal spread between 0 to 1 pips he or she can open simultaneously buy and sell positions and later close both of them on the moment of maximal spread.

As a result profit will equal to maximal spread value. This trading strategy under variable spread conditions has an advantages of low risks involved, because profit probability does not depends in this case on actual currency pair quotation but only on spread value. More over if the trading position is open during minimal spread it guarantees breakeven result and makes profit earning highly possible.

There are several factors that influence the size of the bid-offer spread. Forex spread trading strategies most important is currency liquidity. Popular currency pairs are traded with lowest spreads while rare pairs raise dozen pips spread.

Next factor is amount of a deal. Middle size spot deals are executed on quotations with standard tight spreads; extreme deals — both too small and too big — are quoted with broader spreads due to risks involved. On volatile market bid-offer spreads are wider than during quiet market conditions. Status of a customer also impact spread as large scale traders or premium clients enjoy personal discounts.

Nowadays Forex market forex spread trading strategies high competition and as brokers are trying to stay closer to customers, spreads tends to be fixed on lowest possible level.

Each trader should pay sufficient attention to spread management. Maximum forex spread trading strategies can only be achieved when maximum quantity of market conditions is taken into account.

Successful trading strategy is based on effective evaluation of market indicators and specific financial conditions of a deal. Because spreads are subject to change, spread management strategy should also be flexible enough to adjust to market movement. As a newcomer to the Forex market, there forex spread trading strategies several terms used that forex spread trading strategies may require a definition for. Both these terms are also a very important attribute of the Forex market as both represent the value of a currency pair to the trader and the broker.

In the Forex market, the value of a currency is presented in pips. A pip is a number value; the majority of currencies are priced to four numbers after the decimal point.

Forex spread trading strategies page is part of archived content and may be outdated. What Influences the Spread in Forex Trading? Forex Pips and Spreads As a newcomer to the Forex market, there are several terms used that you may require a definition for. Pip Definition In the Forex market, the value of a currency is forex spread trading strategies in pips.

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In finance , a spread trade also known as relative value trade is the simultaneous purchase of one security and sale of a related security, called legs , as a unit. Spread trades are usually executed with options or futures contracts as the legs, but other securities are sometimes used. They are executed to yield an overall net position whose value, called the spread , depends on the difference between the prices of the legs. Common spreads are priced and traded as a unit on futures exchanges rather than as individual legs, thus ensuring simultaneous execution and eliminating the execution risk of one leg executing but the other failing.

Spread trades are executed to attempt to profit from the widening or narrowing of the spread, rather than from movement in the prices of the legs directly. The volatility of the spread is typically much lower than the volatility of the individual legs, since a change in the market fundamentals of a commodity will tend to affect both legs similarly. The margin requirement for a futures spread trade is therefore usually less than the sum of the margin requirements for the two individual futures contracts, and sometimes even less than the requirement for one contract.

Calendar spreads are executed with legs differing only in delivery date. They price the market expectation of supply and demand at one point in time relative to another point. A common use of the calendar spread is to "roll over" an expiring position into the future. When a futures contract expires, its seller is nominally obliged to physically deliver some quantity of the underlying commodity to the purchaser.

In practice, this is almost never done; it is far more convenient for both buyers and sellers to settle the trade financially rather than arrange for physical delivery. This is most commonly done by entering into an offsetting position in the market. For example, someone who has sold a futures contract can effectively cancel the position out by purchasing an identical futures contract, and vice versa. The contract expiry date is fixed at purchase. If a trader wishes to hold a position in the commodity beyond the expiration date, the contract can be "rolled over" via a spread trade, neutralizing the soon to expire position while simultaneously opening a new position that expires later.

Intercommodity spreads are formed from two distinct but related commodities, reflecting the economic relationship between them. Option spreads are formed with different option contracts on the same underlying stock or commodity. There are many different types of named option spreads, each pricing a different abstract aspect of the price of the underlying, leading to complex arbitrage attempts. Not to be confused with Swap spreads , IRS Spread trades are formed with legs in different currencies but the same or similar maturities.

Two notable examples, U. Dirham and Saudi Riyal interest rate swaps, are quoted in the inter-bank market as spreads to US dollar interest rate swaps. From Wikipedia, the free encyclopedia. Bucket shop stock market Contract for difference Forex Financial betting Spread betting.

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