Reversals and Financial Spread Betting
Reversals trading involves analyzing, with recourse to graphical performance data, the point at which a market or index is likely to reverse based on perceived over- or under-pricing. When analyzing the performance of a market over a recent period, it should become apparent as to where the upper and lower limits of the index have been. As a market or share approaches either of these limits, reversals trading strategies advise that you keep an eye on the index movement and prepare to pounce at the first sign of reversal, capitalizing on the gains made over the course of the price correction.
Reversals trading is particularly popular in that it is a reactive, low-risk strategy that doesn’t attempt to second-guess, but more moves in line with market reactions. Compared with other spread betting strategies, this means its possible to ride the wave of a price correction without having to come in ahead of time, minimizing the potential for losses whilst also reaching a happy medium in terms of the gains achievable.