Long-Term Spread Bet Trader Profile - How Long-Term Traders Make Money
Financial spread betting isn't traditionally thought of as a long-term trading form - in fact, for most the contrary is true, with spread betting instantly conjuring images of quickly scalped profits and fast-paced trading. For some traders, financial spread betting strategies are best deployed with a longer term outlook to enable positions to mature and reflect the more fundamental market shifts that occur over the course of month to month, or even quarter to quarter.
How They Trade
The longer-term spread bettor tends to trade for large price corrections, trends and reversals, projecting results into months and even quarters in advance in order to capitalise from wider market trends. Particularly with moving average strategies and other techniques that help identify trend lines and macro-movement, long-term trading can be the most profitable form of spread betting on a per-transaction basis, simply because each position has much longer (and ideally much further) to run. However, caution is still advised with long-term trading, given the increased market risk and the potential for even more significant losses to develop over the course of the trading cycle.
What They Trade
Trading spread betting over a longer time frame always requires alternative instruments and spread betting types. Spread betting on a day-by-day basis over any length of time is cost prohibitive. In order to afford this kind of flexibility, monthly futures bets and quarterly futures bets exist, created to give spread bettors the wiggle room to project results over a longer-term time frame. Monthly and quarterly bets don't attract the same overnight financing charges as other positions, and as a result are designed to be used for trading over a longer-time frame. This allows traders to have more control over the markets they trade and how they trade them, to leverage opportunities over monthly, quarterly or custom time cycles.
Advantages of Long-Term Trading
Longer-term traders tend to require fewer positions in number to meet the same objectives as shorter-term traders, saving primarily on the spread costs and the research and effort burden across many different markets and position types. The longer the trading timeframe, the more scope markets have to gain points, and as a result the more each transaction can return. Traders who cast their mind long-term can afford to be less active in terms of trade management, freeing up resources and time to concentrate on developing other areas of the account and trading strategy. And with the benefit of much wider potential swings in market prices, longer term trades and instruments can deliver larger single gains.
Disadvantages of Long-Term Trading
Of course, finding long-term trading opportunities that satisfy risk/reward ratios is easier said than done. The longer a position is open, the more likely it is to run against you and cost money. A position that's only intended for a day can only go so wrong - a longer-term trade left to go bad can cause untold damage to your capital and your trading account. Furthermore, making calls about the shift in momentum and market trends tomorrow is difficult, and forecasting next week is even harder. Next month is a minefield of variables, and next year is usually just pure speculation.