What is spread trading and how to do it?
Spread trading is a kind of derivative trading, also known as spread bet. Is a bet on a specific market or financial instruments in a specific time between the bid and ask price behavior. Foreign exchange spread trading focuses on the money market. Today, let's talk about spread trading and how to do it.
1、 What is point trading
Spread trading can be two-way operation, both up and down can be profitable. When the price of a currency goes up, if you buy (bullish) the currency, you can make a profit, and vice versa. Spread trading means that you only need to pay a small amount of money for your trading position, because your potential profit or loss is usually higher than that of traditional trading, and you also need a margin of 1% to 10% of the total position value when opening a position.
Differences between foreign exchange trading and foreign exchange spread trading
The biggest difference between the two lies in the size of the transaction and the use of leverage. For foreign exchange spread transactions, the margin is multiplied by the margin coefficient by the amount of bets. The margin of foreign exchange trading is determined by leverage (the size of leverage is set by you). Leverage plays an important role in traditional foreign exchange trading. Please see the figure below for details.
What is spread trading? Spread bet.
Spread trading allows investors to speculate based on market conditions and gain losses and gains based on the direction of their trades and the amount of price changes.
The similarities between spread trading and CFD price difference contract are as follows:
There are many similarities between spread trading and CFD contract for difference, which provide investors with high return potential. At the same time, they are much more risky than traditional transactions, because consumers may lose more than their original investment. In some cases, traders may appeal to the court to recover from consumers the amount of money that investors have lost in excess of margin.
2、 How to do foreign exchange spread trading
There are four common types of spread transactions:
1. Intraday spread trading
The trading time is usually from minutes to hours, and multiple positions can be opened on the same day, and the profit mainly comes from small price changes
Based on the market information and technical analysis, the transaction has a smaller spread and a lower margin requirement. The transaction is closed before the closing of the day. There is no overnight risk and no rollover fee. The transaction may be closed before maturity.
2. Short term spread trading
Several positions are traded in a week, and the trading cycle is from 1 day to 1 week. Based on market news and technical analysis, the profit usually comes from the trend change of 1% to 5% in the market, which is suitable for most financial markets. The point spread is small, and the overnight expenses are less. The interest will be shown in the credit card / debit card separately. On the long-term settlement day, the position will not be opened or closed again every night, and the transaction can be expired Close before time.
3. Central line spread trading
Several positions are traded in one month, and the trading cycle is from 2 to 1 month. Based on the technical and fundamental analysis, the profit usually comes from the trend change of 5% to 10% in the market, which is suitable for most financial markets. The point spread is large and the monthly maturity is fixed. When the maturity time is close, the position can be extended to the next month, and the transaction can be closed before the expiration time.
4. Long term spread trading
Several positions are traded in a few quarters, and the trading cycle is usually 1-2 quarters. Based on the technical and fundamental analysis of transactions, the profit usually comes from the trend change of 10% or more in the market, which is suitable for most financial markets. The spread range is large, the quarterly maturity date is fixed, and there is no overnight fee. When the maturity time is close, the position may be extended to the next quarter, and the transaction can be closed before the expiration time.
Today, I'd like to share with you what is the spread trading and how to do it.
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