Answer follows below -:

No, spread betting companies such as IG Index don’t take opposite positions in the hope that they win. This is a common myth which is perpetuated when clients lose money. This is not their business model and its far too risky.   For every particular share say Barclays, they look at the net position of all their clients on a ROLLING BASIS and not just an individual’s order at that time/spot because,

“what is the point of matching (or going against) a client 30 minutes after they have placed their bet only to find out that someone else has placed a larger bet in the other direction 32 minutes later?

They will keep changing their positions in the market so many times and their costs of commissions, fees will be too high and in the long run they will lose money. Their dealing costs would be massive and this is not their business model.

Fundamentally spread betting companies provide a platform/market place for clients to bet against each other based on the financial markets movements.

They make a lot of money on the spreads and because of their business model, they do not like or need to take extra risks unless they have to in certain circumstances.

A spread betting company doesn’t like taking positions in the main market because they lose control of their little set up and have to pay commissions to hold these positions as well.

They are happiest if all the longs match the shorts. Imagine a spread betting company having their short matching their longs, then they have ZERO risks and pocket the spreads.

However if their net position internally for say Barclays is skewed to one direction then, they need to manage their risks just like the hedging you mentioned above

But, they actually don’t go against their client’s net position, they go with the overall net position.

If everyone of going long on Barclays (including you) and a few people are going short, then they will go to the external market and buy Barclays to make the difference.

If Barclays goes up, then since they hold the shares, they will also make profit and use the profit to pay you and keep the spread and also keep the looses made from those going short.

If Barclays drops, then they will keep all the money from the large sheep (punters) who went long and pay the few that went short and also use the money gained from the punters that went long to cover their losses from the stock exchange shares they bought and they will be no worse off and hence minimal risk.

Imagine if they gambled and got it wrong, they will be out of business quicker than you could blink.

The only decision they have to make is how much to hedge in the main market and when to open / close it based on their internal risk management criteria  To make this decision, they use sophisticated risk management software and techniques and not really based on individual orders because the positions are changing so many times per hr and it will be virtually impossible and too expensive to match or go against every single punter.

So they look at their net rolling positions and make decisions to hedge or not in the main market.

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Ideally, I need to find a few shares and/or indices on which I could enter a trade in the morning and let it run until it hit the stop or the limit OR shares/indices that I could trade in the evening or early morning (before/after work). Just need to find the share and research the technical analysis behind it to decide when to enter… and ideally, that would allow me to make to 10-50 points per day…I may be asking too much for now!

My other  advice is not to follow discussion forums too closely. Most try to appear as know it all and most are relentlessly bearish. I suspect some work for the spread betting companies. If you need to know what is happening in the markets minute by minute then watch CNBC but take everything with a pinch of salt as what the media shows is what they want you to know!

Here’s a few extra spread betting tips and strategies to improve your chances of success -:

• Read a few good trading books such as “Trading in the Zone” and “Come into my Trading Room.
• Always watch interest rates and price/earnings ratios. Low interest rates and low price/earnings ratios equals bull markets.
• Don’t over leverage.
• Don’t trade currencies.  I consider currencies to be a lottery.  The national lottery is very popular. Currency trading is very popular. It appeals to a particular mindset. IMO it’s a harder game to win at than equiities.
• Don’t overtrade.  The most common problem is overtrading, reinvesting your profits to soon after a win without any clear direction set out.
• Or worse of course going back in instantly to reclaim your losses, and doubling them instead, that must be quite bad if anyone has ever done that as unlikely as it may sound.

It is very important not to be too clear when trading the markets.   I see so many newbie investors doing what Cramer is recommending and following what fund managers are recommending is buy.  Intellectually you can make lots of arguments as to why shares should fall but if most people (unaware/ignoring those arguments) think they will go up then most people are buyers and prices will rise.

I have come to the conclusion that preserving cash is a better strategy than attempting to trade in a market that is beyond me.  The only frustration is that whilst doing nothing doesn’t create losses, it also doesn’t create any profit.

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In trader terms, pattern recognition – also called chart pattern recognition – is simply a form of price analysis. There are many different types of chart patterns; Symmetrical Triangles, Wedges, Ascending Triangles, Flags and Pennants, Descending Triangles, Rectangles, Head and Shoulders, Tops and Bottoms, Double Tops and Double Bottoms, Cup and Handle…etc These patterns, which have been used by traders in all asset classes for years, generally fall into two categories – reversal and continuation. A reversal pattern indicates the current trend will likely reverse upon the completion of the pattern.  Conversely, a continuation pattern indicates that a trend will likely continue upon the completion of the pattern.

Here are a very small selection of chart patterns that you can profit from in your trading:

Double Tops / Double Bottoms

This chart pattern represents a reversal in the market. In a double tops set up, price rises to resistance and bounces off it when sellers outweigh buyers. Price retraces for a short while before returning up to the resistance level. If price bounces off the resistance level once more we have our double tops set up and we can make a short trade with our stop just above the point of resistance.

Double Top Technical Pattern

The reverse set up is double bottoms. Price falls, bounces off support and retraces a short distance. It falls again to support and starts to reverse. You can enter a long here as price confirms the reversal with your stop placed under the level of support.

Double Top and Double Bottom Reversal Patterns

Head and Shoulders

This chart pattern is another reversal set up that you can profit from. Imagine that your instrument is rising strongly before it pulls back slightly. The trend then resumes and the instrument takes out a new high. When price retreats from that new high it does so with more pace and conviction than the previous retracement, returning all the way back down to the level of that first pullback. When the upward trend resumes, it does so very weakly before failing. This is your moment to take a short trade as price fails again. Your stop loss is at the most recent swing high.

Bull Flag

This chart pattern is a continuation pattern. We are looking for a stock or other instrument that is in a bullish flag. It makes a new short term high and then makes a slight retracement. This retracement is unlike most other retracements in that it forms a downwards parallel channel which resembles a flag. When price breaks out to the upside of this flag we can take a long trade. Our stop loss should be placed just below the point of breakout in case price retreats back into the flag channel.

Bull Flag Chart Pattern

The bear flag is the opposite chart pattern whereby a falling stock makes a rising, flag-like retracement channel. You enter a short when the flag is broken to the downside with a stop just above the breakdown point.

There are a whole multitude of chart patterns that you can use in your financial spread betting and this article has just been an introduction to a few of them. Introduce them into your spread betting gradually, learn them in detail and understand how you can profit from them.

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Support and resistance are useful features of price action that you can use to profit from in financial spread betting. This article firstly looks at the definitions of support and resistance and then looks at a couple of examples of how you can use them to your advantage.

Support represents a price level at which more buyers than sellers have historically been found. If you look back at a chart of recent price action, you may see that there are certain levels of price that the instrument has fallen down to only to bounce back up again. These price levels are significant in our financial spread betting because history often repeats itself. If there is a price level at which more buyers than sellers have been found before to support the price level, then there is a chance that more buyers might be found there again.

Resistance is the opposite of support and represents a price level at which more sellers than buyers have historically been found. You may see on a chart that price has historically risen to a certain level but failed to break through and retreated. Again, these levels are significant in our trading because history often repeats itself. There is a chance that if more sellers than buyers have been found at that price level before, then more sellers might be found there again.

We can create trading strategies using support and resistance by closely examining what happens at these critical levels. Price will either bounce off the support or resistance level or it will break through it. We can devise trading strategies to profit from either occurrence, but it pays to always try to trade with the underlying market trend.

Trading breakouts through resistance is a profitable strategy. If the underlying market is bullish, we want to favour longs in our trade selection. If, for example, we find a stock that is climbing with momentum as the underlying market is moving up, it is a good candidate for a long trade. If that stock has previously bounced off resistance levels and is now approaching those levels, we may want to enter a long position if price breaks through. Once in the trade, our stop loss is placed slightly below the level of prior resistance because this level now becomes our support.

If the market is bullish and our stock has been climbing but is now retracing, we can use support levels to enter another trade with a tight stop. As the stock retraces to our support level, we can enter a long position as soon as it bounces off the support level. Our stop loss is again just underneath that level of support.

Short set ups can be found when these conditions are reversed. In both these trade set ups, don’t assume that the market will do what you want. Always wait for confirmation of the set up before entering your trade. This will allow you to achieve an acceptable win/loss ratio.

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Candlesticks are simply a way of visualising the price open, close, high and low for a certain time period. If we look at daily candlesticks, then each candle corresponds to one day. The candle consists of a vertical line which runs from the high of the day to the low of the day. The open and the close will be within that range and they are represented by the length of a thick rectangle. Typically if the day closes higher that it opens, the candle is coloured green and if the day closes lower than it opens, the candle is coloured red. Note that the candle periods do not need to be daily; any time range can be used.

On the surface, candlesticks present an attractive way of describing the price action in a specific period. The real power of Japanese candlesticks, however comes in the recognition of various chart patterns. There are hundreds of different chart patterns that can be used to give clues as to where price is likely to go to in the near future. Numerous chart patterns signify reversal events and many more signify continuation events. Candlestick patterns are not on their own a holy grail of trading profits, they are just one of many tools that you can use in your trading arsenal. Let’s take a look at a couple of these Japanese candlestick patterns.

A bullish hammer is one of the simplest candlestick reversal patterns. This pattern consists of a single candle that tells us that the market might reverse soon. The market needs to be in a bearish trend for this pattern to be useful. We see a small body (meaning the open and close are close to each other) and a large trading range for the day. The open or the close should be at the high of the day. Look for the next day to open up and/or trend up to enter a long position. This pattern works best when found at the end of a strong downtrend into support.

An example bearish reversal pattern is the dark cloud cover. This pattern consists of two candles that occur at the end of a rally. We see a long up candle on the first day where the open is near the low and the close is near the high. The second day presents a long down candle with the open near the high and the close near the low. The second candle closes below the midpoint of the first. This pattern is an excellent candidate for a short when it comes at the end of a long rally into resistance.

There are a vast number of possible candlestick chart patterns and it is beyond the scope of this article to investigate more than a couple of them. Candlestick patterns are best used in conjunction with other technical analysis tools. Combine them with support, resistance, volume analysis and other indicators to refine your trading strategy. Each of these tools adds a small percentage to your edge but it is when you use them all together that you will begin to realise your profit potential.

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Financial-Betting.com: Ok to start, when did WorldSpreads first open for business? How big is World Spreads?

WorldSpreads:  WorldSpreads was launched in November 2005, but actually started 6 months prior to that. It probably took us 1 year to get an FSA licence and to build our trading platform. After 5 months of trading we have 6 dealers who look after over 500 clients and 100 Regency accounts. We have offices in London’s Regent Street, Dublin Ireland, Athens Greece and representative offices in Spain and Hungary.

We ask: Tell us about your product offering

WS:  WorldSpreads is FSA regulated in the UK and we offer a spread betting service both over the phone and online. We are currently offering 1 tick spread on FTSE, Dax and CAC as well as 1 tick spreads on the rolling spreads for EURO/$, USD/JPY & USD/AUD. We also offer 2 tick spreads on GBP/USD and the Wall Street Rolling Future.

We ask: Why would I, as a private investor who over the years has bought and sold my Vodafones, Glaxos and BPs, want to start doing spread betting on all these different markets?

WS:  The main incentives are the following, gearing, a large variety of markets, lower margins, credit facility and the ability to hedge your portfolio.

We ask: What types of underlying investments, markets and events can I trade on? Can I trade different types of vehicle through a single account?

WS:  With one account you can trade any of the markets we offer. Please view our market information sheet online or call to discuss. We offer Equities, Indices, Currencies, Commodities, FX, Bonds, and Interest rates.

We ask: What dealing platform do you use? What would you say really stands out about it?

WS:  Our dealing platform has been designed for simplicity and ease of use. As one client pointed out to me, all I want is a platform to deal on that allows stops and limits and cheap spreads. The outstanding functionality of our system is that it very rarely goes down and it is very easy to use. Do not take my word for it please apply online and check it out.

We ask: What is your company’s main activity?

WS:  We are proud to say we are 100% a spread betting company and we are industry professionals with many years of experience. We are also looking to offer CFD trading from our London office.

We ask: What is the procedure for opening an account? How much do I need? Is there a maximum deposit?

WS:  Opening an account is a simple procedure, one must log into our homepage www.worldspreads.com and in the top right hand corner click on ‘Open an Account’. Please read the terms and conditions.  Over 90% of our clients open online, however if you would like to fill out a physical application, do not hesitate to email us and we will be happy to send an application form to you.

We ask: What are the minimum/maximum trade sizes?

WS:  The minimum trade size is £1 per point in any of the markets we offer and the maximum is dependent on the market size or your accounts position.

We ask: Do you accept international clients? Do you accept deposits by BACS? Which other payment methods do you accept?

WS:  We accept international clients from any country based on a deposit account only. Except in the USA as spread betting is illegal. Methods of payments include BACS/ CHAPS/ and card payments, please find these details on our website.

We ask: Are clients treated as intermediate clients or private investors?

WS:  Because we segregate our client funds, our clients are regarded as private clients. Spread betting clients are not investing in the markets they are in general speculators. Having said that investors do hedge their portfolios with WorldSpreads

We ask: Are the commissions negotiable? i.e. are traders who trade bigger amounts or more frequently eligible for discounted commission rates or other perks?

WS:  Of course, one great thing about WorldSpreads is that we are flexible and will happily negotiate with all our clients. We do have extremely tight spreads in comparison to the other spread betting firms, however we are also attracting many clients that trade the underlying futures.

We ask: Do you offer credit facilities? Can accounts be overdrawn?

WS:  One of the benefits to spread betting is a credit facility, and WS will offer a credit facility to UK clients based on proof of funds. Please ask us if you would like a credit facility.

We ask: Do you quote all UK companies or only those within a substantial market cap? What kind of notional risk can one expect on a typical market? Can one trade outside market hours?

WS:  You may trade UK stocks on a rolling/ futures contract with WS. We typically go down to a minimum market cap of £30 million or a minimum NMS of 3000. Please do ask as our dealers.

We ask: Please detail the kind of stops and market orders being offered by World Spreads. Do you offer guaranteed stops?

WS:  We offer stop orders and limit orders basis market price or quote price. These orders can be guaranteed or left un-guaranteed. A guaranteed order will incur a nominal charge that will be debited from your account upon leaving the order.

We ask: What is the Initial Margin Requirement (and general margin requirements)?

WS:  Initial margin for our main markets are FTSE cash 100, which reduces throughout the day to 30. Our daily rolling margins in GBP/EUR/JPY rolling currencies are 150. Initial margins on FTSE 100 shares are 5% whilst 350 stocks are 10%. Smaller stocks have varying margin rates.

We ask: Are there any general safeguards for clients – protected accounts for clients’ money or segregated accounts…etc?

WS:  Clients funds are segregated and held in a Royal bank of Scotland bank account. The FSA assure clients up to £40,000 so you are in theory protected up to this amount. However we must assure you that your funds are segregated and your funds are not used in order to hedge positions.

We ask: Are there traders who make a living through spread betting at WorldSpreads? What is the trading style and methods that these traders use for winning consistently?

WS:  At present we have a large number of day traders that are trading for a living. A lot of ex LIFFE traders have opened to trade the FTSE on a 1 tick spread and the rationale behind this is that it is a tax free alternative to trading the futures contract.

The trading style of a winning trader is simple, know your markets, know your trading system, be aware of market data, grind it out and don’t look for the one winning trade, and finally make money.

We ask: What has been the clients’ reaction?

WS:  Exactly the above, but we are reducing our spreads massively across the board. We are hoping that these changes will benefit our clients. They want to trade more with us, and I have noticed that clients that have opened with us are generally trading more frequently. The reaction has been very positive and we hope it continues to be mutually positive.

We ask: What type of client and what type of uses are your particular products most suitable for? Can it cater for those looking into short-term trading or scalping or is it more suitable for those wishing to take longer time views (weeks or even a few months)?

WS:  Both we hope, we offer tight spreads on daily and rolling contracts and we also offer competitive rates on the Quarterly contracts. We also offer credit which suits swing traders and for the scalping client you can nick quick profits on our index or currency contracts.

We ask: Who is predominantly making up your customer base at this time? Also, what kind of people are your customers – i.e. do they tend to have City experience?

WS:  At present the majority of our client base consist of full time to semi full time traders, with experience of trading in the spread betting industry. City experience does not necessarily mean you are going to be a better trader, but it may mean you know the markets a little better. We do have a lot of city financial traders and risk managers that trade with us, they prefer to trade with a smaller less established company because they get better service.

Alpesh Patel has introduced many of his clients to WorldSpreads, these clients are typically customers that have been to his seminar and are in the process of learning.

So in answer to your question, we do have a broad spectrum of clients and that is the nature of the financial spread betting industry.

We ask: Are there any other fees which our readers need to be aware of besides your commissions? Do you charge a quarterly trading account fee or an account inactivity fee or a fee for cfd trades made over the phone…etc? Are there any charges for telegraphic transfers and late payments…etc?

WS: The only other fees are the daily rolling contract fees, which are +/- 1.5% Libor for UK stocks and the rolling of futures contracts that incurs a small fee.

We ask: What services are you offering that others aren’t? Why should clients choose WorldSpreads as their spread betting firm of choice?

WS: 1 tick spread in the FTSE/ a private banking approach to spread betting/ and a cracking service, we hope!

We ask: How do spread betters make money? There is a conspiracy theory that companies only make money by clients losing money.

WS: Spread betting companies make money from spreads, that is our margin and risk premium. Most clients that I talk to ask me the question, “Do you make money from my losses”. I do insist to clients that spread betting firm’s pool risk because we cannot hedge a £5 trade on the FTSE for example. So with that in mind spread betting firms do win or lose – to spread betting clients. I always remind clients it is hard enough trading the markets + having to concentrate on the spread betting firm making or losing off you. Do not trade emotionally just trade the price.

We ask: What are the common hurdles a new spread better faces?

WS: Getting wiped out quickly. I hope this tip stops people from getting wiped out quick, ‘do not punt a view but study a trade’.

We ask: As of now, what trends do you see in the markets people choose to trade? Are there any sectors, contracts, currencies, indices, particular markets where your clients are clearly more or less successful? Do you think this will change over time?

We ask: Clients have been taking a much greater interest in commodity and currency plays recently. This is only natural as they have been the more volatile markets which provide traders with larger daily/ medium term swings. In the 80’s and 90’s stocks were the major trading instrument, and now a lot of our business flow is concentrated on the dollars movement! Trading in commodities and currencies has become far cheaper. I was actually discussing this with a client and he said it was true for commodities as the currency markets have stabilized recently with the markets getting use to the Euros value. The reasons why clients trade currencies are because they can move a lot more in tick value than equities, and are more sensitive to macro data.

WS:  Currency trading will take off massively in the UK and we have seen the tip of the iceberg so far.

We ask: There are many sayings in the markets; do you have a favourite one?

WS:  “The gambling passions lurk in all of us” – Honore de Balzac

We ask: Do you provide any training for new clients? Are there any virtual trading facilities?

WS: Demo account if you want, but if you are a genuine trader and want to take advantage you have come to the right place.

SPREAD BETTING IS A LEVERAGED PRODUCT AND PUNTERS CAN LOSE MORE THSN THEIR INITIAL DEPOSIT. PUNTERS SHOULD ONLU ALLOCATE A PORTIION OF THEIR INVESTMENT FUNDS TO LEVERAGED PRODUCTED SUCH AS SPREAD BETS AND CFD’S AND SHOULD SEEK INDEPENDENT ADVICE IF NECESSARY.

ALSO, NEED TO MENTION THAT THE FSA DICTATES THAT WE REMAIN EXECUTION ONLY. WE ARE NOT PERMITTED TO GIVE SPECIFIC TRADING ADVICE. WE CAN MENTION CERTAIN BASIC STRATEGIES BUT CANNOT ADVISE A CLIENT WHETHER TO BUY OR SELL A PARTICULAR INSTRUMENT.

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Scaling into positions entails buying more of a winning trade you have already entered. Perhaps that is why traders are averse to doing it – after all, you must pay more for the new spread bets than you did for the original ones in the same security, and that goes against the grain. But the way that many novices trade is bound to cause some problems in the long run – what they do is scale into a position if it falls in value.

Why would you buy more of a trade that has lost value? The thinking is that if it was worth buying at the previous price, it must be even more worth buying if the price has gone down. But this is muddled thinking, as the reason for buying in the first place was in the expectation that the price would go up, which it plainly has failed to do so far. That’s not to say that it won’t perhaps turn around, but the odds are getting slimmer.

So while it may feel strange, scaling into a position requires you to buy more when the price has gone up, because then your trade has started to look like a good one.  If you are wondering why you wouldn’t just put all your eventual bet into the trade at the start, then you only need to think about your money management, asset allocation and the amount that you risk losing.

It is common practice to limit the amount you can lose in any particular trade by considering where your initial stop loss should be, and calculating the position size from this to limit your total possible loss. When the trade has moved in the right direction, you can move the stop loss to protect your gains, and therefore you no longer have the same potential loss. This means that you can afford to place a further trade on the same spread bet, as if the bet turns against you, your losses are still held down to an acceptable level.

You should not scale a trade as a matter of course, if it happens to start in the right direction. You still need to check the indicators, and make sure that the reasons you entered the trade in the first place are still valid.

So scaling into a position allows you to profit more from a good trade than you could if you just entered an initial trade set by the maximum loss you work to. It is a high percentage strategy, because the trade has already proved itself likely to work by starting to move in the right direction. Making more money with less risk is one of the principal ideas that you want to pursue as a trader.

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A common use for spread betting is to hedge (offset risk) in an existing portfolio.

As an example.

An investor holds 100 ounces of gold, which after a rapid run-up is currently valued at $1000 an ounce, giving a market exposure of $10000. The investor thinks that the price is likely to temporarily fall over the coming months, but does not wish to sell due to trading costs, and wishes to lock-in his profits.

As it stands, for every dollar the gold price falls, the investor stands to lose $100.

Therefore that investor chooses to place a sell bet for $1 per cent on the gold price.

Any drop in the investors original portfolio will be made up for by profit on the bet, conversely, if the gold price continues to rise, the profits on the investors original portfolio will be consumed by the losses on the bet – effectively making him ‘market neutral’ for the duration of the bet.

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Leverage is a term used for trading on ‘margin’ or borrowed funds. Let us consider the following bet:

The FTSE is currently at 6150 with a bid/offer of 6151/6149 We place a bet that the FTSE will rise:

We BUY the FTSE daily @ 6151 with a guaranteed stop-loss at 6131. As our maximum loss from this bet is £20, this is all we will need in our account to place the bet.

However, the price movement within the day is equivalent to having £6150 invested in the index, allowing for vastly increased profits and losses.

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2. Trade with the trend. Let your profits run and cut your losses – losses are harder to recover than to make a gain.

3. Buy on dips near support. Sell on rallies near resistance.

4. Don’t chase price; buying when price is extended increases your risks astronomically. If you miss it or are late, let it go. There’s always another trade.

5. Don’t force a setup or trade. If you have to make it look good, it probably isn’t. Wait for the perfect setup. You may only get two or three a day, but wait for them.

6. Develop a money management system. Do not risk more than 5% of your capital in any one trade.

7. De-leverage. The more margin you use, the more your risk. Start out slow with as few contracts as possible. Build your trading account and capital before you increase leverage.

8. Use Stop Losses to protect yourself from losing trades – Stop loss orders are useful in that they help to reduce the need to monitor the markets on a continual basis. Set a best/worst profit/loss level for each trade and stick to it. Use a disaster hard stop; and a mental close-by stop. Guaranteed stops also help to protect against gapping.

9. Be disciplined.

10. And finally take responsibility for your own decisions.

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