SPREAD BETTING EXAMPLES – Barclays Shares

I have always been of the opinion that the best way to learn a concept is through examples, and here I present a spread betting example that applied to Barclays PLC that will help your learn how to Spread Bet. So let’s get started.

Let’s say that you believe that Barclays shares were undervalued and that the market has sold them more on a small scare than a real change in company fundamentals. Therefore they have a good chance of rising in the near future. One way of taking advantage of this oversold state, would be to invest money in Barclays and buy the actual company. If your analysis proved to be correct, and the share price did return to their correct value, you would sell your shares at a higher price, making a profit.

An alternative way of taking advantage of your opinion would be to make a spread bet, backing the price to move higher.

Most Spread betting companies have a two-way quote of prices, at which you can ‘buy’ (that is back the price to rise) or ‘sell’ (if you were expecting the price to fall). As it is a bet, all prices you do spread bet on will have an expiry. Normally the expiry co-insides with the expiry of the financial futures date. You cannot hold the spread bet forever, but you can close the bet any time you wish before the expiry date. Similar to conventional trading, you can close your trade at anytime. Later I will expand on the expiry dates, but let’s keep it simple for now. Let’s say that you only want to take a short term bet on Barc.l

(Below Spread Betting Example of Spread Betting on Barclays Shares)

On our Hourly Chart you see Barclays forming a support area at 170 and you decide to make an up-bet by buying waiting for it to reach 169-170 again and buying higher end of the quote (the difference between the sell and buy price is known as the ‘spread’, by the way, and is where spread betting obtains its name from).

Similar to Share Dealing, the bigger the deal size the more you risk or stand to make or lose money for a given movement in the price. In spread betting you don’t deal in numbers of shares or contracts, spread bets are denominated in a set Pound per Point movement. Let’s say you decide to buy £10 per point. This means that you will make or lose £10 for every point movement the share rises or falls . 184 is equivalent to £1.84 GBP the price of Barclays shares. Therefore one point movement is equivalent to one point movement. Therefore for every penny Barclays moves you will make or lose £10.

Over the next few hours the Barclays share price moves higher reaching 183-184 as you can see the picture in Barclays spread betting example.

You decide to sell your spread bet and take profit. You close your spread bet by ‘selling’ £10 per point at 183 (the lower end of the quote).

Your profit and Loss is calculated by subtracting the price you bought your Barclays share 170 from the price you sold your Barclays share at (183). You closed your bet 13 points higher making a profit of £130 profit.

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Morning Star

Morning Star Japanese Candlestick Pattern

The Morning Star Pattern usually occurs at the bottom of the downtrend and is a bullish reversal pattern. The pattern has three components:

Day1) Large Bearish Day: A long black candlestick.
Day2) A small Bullish or Bearish candlestick that gaps below the previous day’s close. This candlestick could also be a doji, in which case the pattern would be a morning doji star.
Day3) A long Bullish candlestick.

Spread betting example of the morning star.

The Morning Star pattern appears at the bottom of a downtrend with a first large bearish reversal candlestick pattern. The first day, the bears are definitely in control, often making new lows.

Day 2 begins with a bearish gap down. It is clear from that the bears are in control as this candle stick gaps lower. However, as the day proceeds, the bears are unable to push prices lower. The candlestick on Day 2 is often a small candlestick and can be bullish, bearish, or a Doji candlestick pattern (neutral/Indecision).

A bullish candlestick on Day 2 is a stronger sign of turn in trend, indicating a possible reversal. But Day 3 is the highlight of the Morning Star Pattern, as it begins with a gap up. This is a strong bullish sign showing the bulls are in control, pushing prices higher, often reversing Day 1’s losses.

Morning Star Forex Spread Betting Example

The chart below of the Forex Spread betting pair EUR/GBP shows a spread betting example of a Morning Star bullish reversal pattern that occurred at the end of a downtrend:

Day 1 of the Morning Star pattern in the EURGBP chart above was a strong red bearish red candle. Day 2 showed sign of reversal as the Day ended with a small positive sign after opening with a Gap Down. Day 2 Bears were unable to continue the downtrend of the previous day. Day 3 the bears tried again to push lower but failed and the bulls took strong control, Pushing aggressively upwards squeezing the bears out of the market and closing way above the close of Day 1. Both the downward trendline break and the classic Morning Star pattern gave traders a signal to go long and buy EURUSD Forex Spread betting pair.

The Morning Star pattern is a very strong three candlestick bullish reversal pattern. The opposite of the Morning Star Pattern is the Evening Star pattern, a bearish pattern (see: Evening Star).

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CCI -1 Min Scalping System

This is Forex spread betting scalping strategy, I have used it on an MT4 but can also be applied to other charts
Trade From 8am UK time to 16 UK Time

Time Frame: 1 min

Forex Spread Betting Rules:

Trade Long:
Indicator: CCI (170)
Wait for the CCI 170 to cross the 0 Line showing an uptrend. It must be the first indicator to cross.
Indicator: CCI (34)
Wait for the CCI 34 to cross above the 0 line, also showing an uptrend. This must be the second indicator to cross in the same direction as the CCI 170
Indicator: RSI
Price must be above the 14 Moving average

Trade Short: (opposite to the above)
Indicator: CCI 170
Wait for the commodity Channel Index (CCI) 170 to cross below 0 line, showing a down trend, and again t must be the first indicator to cross.
Indicator: CCI 34
Wait for the commodity Channel Index (CCI) 34 to cross below 0 line, showing a down trend, and again t must be the second indicator to cross.
Price must be below the 14 Moving average

Settings:
CCI 170 PERIOD 170
CCI 34 PERIOD 34
Moving Average 14

Important: This system relies heavily on support resistance, Fibonacci levels and pivot points. so if you are near near a support and resistance line, wait to see what the price reaction will be. Wait to see if prices break the support and resistance or bounce off these levels. Always follow the trend and look to buy and tops and bottoms.

Forex Spread Betting Examples of the CCI -1 Min Scalping System applied to the EURUSD:

In the spread betting example, you can see I only took the longs trades as only in the long signals did the Commodity Channel Index 170 cross above the 0 line before the Commodity Channel Index 34

I Thank Canadian Dude for inspiring this Forex Spread Betting Strategy.

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Japanese Candlestick Basics

Candlesticks are the most basic form of chart reading. The Japanese started using candlesticks in the 17th Century. They are very simple to use but very rich in interpretation. Many Price Action Technical Analysts or traders use only candlesticks to trade, as indicators are latent to price movements.

There are two types of candlesticks:
Bullish: When the closing price is higher than the opening price. Prices have moved higher.
Bearish: When the closing price is lower than the opening price. Prices have moved lower.

Candlestick components

Upper shadow: is the vertical line above the body f the candle. Goes from high to close (bullish candle) or open (bearish candle)
Real body: is the difference between the open and the close
Lower shadow: is the vertical line below the body. It goes from the low of the candle to the close (bearish candle) or open (bullish candle).

Candlestick Patterns
In the candlesticks you can see human emotions. There are many candlesticks, and are either reversal of continuation patterns, greed or fear.

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Elliot Wave

Elliott Wave Principle is a form of technical analysis that some traders use to analyse financial market cycles and forecast market trends
Elliot wave were discovered by the professional accountant, Ralph Nelson Elliott (1871–1948). He stated that prices move in waves. These waves repeat in cycles over and over again. The waves are:
(1) move up, (2) partial retracement, (3) Move up, (4) retracement, (5) the final move up. Then starts the retracements cycle: (A) Full retracement (b) partial retracement, (c) a full move downward. Then the two cycles start again. Look at the Spread betting example below to see the cycles. This picture was taken from Steve Nison’s book: “Japanese Candlestick Charting Techniques”.

Below you can see the various cycles. The Elliot Wave cycle repeats in both macro and micro time frames, as you can see above:

GrandSupercycle
Supercycle
Cycle
Primary
Intermediate
Minor
Minute
Minuette
Sub-Minuette

Let’s go through a Spread trading example of how the Elliot waves are applied to spread betting strategies:

How to spread bet with the trade the Elliot waves:

Elliott Wave is based on crowd psychology. There are two types of waves the impulsive wave and corrective wave, booms and busts, rallies and retracements.
The Elliot waves tell traders where trends are likely to stop or come to a halt, and these are areas where they take advantage of placing their buys or profit areas.
The chart above illustrates the Elliott Wave pattern applied to EURUSD.

As the A,B,C corrective Waves finish we have the first leg upwards 1. When the upward movement seems to have finished ad starts turning the traders look at putting their buy orders at the 38% retracement, and looking for an upward extension of the wave 3. In the EURUSD above, the prices bounced off the 38% retracement moved a little higher, then came back down and stopped out the traders that had bought at the 38% retracement. The spread betters decide now to wait for the 50% retracement and place their buys again. At the 50% retracement they are looking to do the same trade, run it until the extension of wave 3, which is 1.618 projection upwards. The Elliot waves are based on the Fibonacci levels. Once money has been made, they wait for the 38% retracement again at level 4. After the last move higher finishing in wave 5. Traders are expecting now a corrective wave.

Spread betters would now not go against the trend but wait for a retracement of the first A wave down, at point B (retracement) and Short the EURUSD on the C leg all the way down to 100% retracement. On the other hand, Some spread betters wait for the C wave to complete then trade long. They would use the 61% (golden Fibonacci ratio) and 100% retracement to see/expect where the wave will end.

Further reading would be the Fibonacci Levels

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