FTSE INDEX Archives - Spread Betting Examples

ZigZag

ZigZag per se is not an indicator, but it is a filter to show you where the trend has changed. In various spreadbetting strategies this is very useful in showing you where to find support and resistance areas or various classic patterns like a double bottom, triple bottom head and shoulders.

As a spread bet trader you define the ZigZag Indicator filtering out what percentage swing you are looking for between the previous high and the previous low. A 5% setting will draw a change of direction once prices have changed 5% for the recent peak or trough.

-Below is a spreadbetting example of the FTSE Index applying a 5% ZiZag Line

The lower you apply the settings to the ZigZag indicator the more sensitive it will be to a change in price from the previous high and low. This is subjective to how much noise you want to filter from the price movement.

Below is a trading example of the FTSE 100 with a 2% setting, thus making it more sensitive to price change.

You can apply this indicator on any Index, Forex currency, stock.

In the next article I will show you how to practically use the ZigZag indicator to filter out patterns or used also in the Elliot wave count.

Next: ZigZag – Practicle use.

MACD Convergence Divergence

Convergence and Divergence are very strong signals in the various spread trading strategies. Now we will see this applied to the MACD.

Lets recall:

Bearish Divergence is when prices of the Stock, index, Forex pair are making new highs but the technical indicator is telling you the opposite, it is showing weakness.

Bullish Divergence is when, instead, prices of the Stock, index, Forex pair are making new lows but the technical indicator is not confirming the new lows, instead it is making higher lows.

Below is an example of the FTSE INDEX:

In the above example we see the FTSE100 Index, this is a spread betting example of the MACD convergence & divergence spread betting strategy.

1) Bearish Divergence – Prices are making new highs. The second peak in the FTSE100 that follows is higher than the previous peak. Instead in the MACD crossover is showing weakness as it fails to confirm the highs by not following with a new peak.

1) Bearish Divergence – Prices are making new Lows. The second trough of the FTSE100 that follows in February is lower than the previous peak. Instead in the MACD crossover is showing strength as it fails to confirm the lows, instead it is making higher lows.

Previous: Spread Trading with the MACD Histogram

Exponential Moving Averages

The exponential moving average also known as the exponential smoothing. This indicator is the one preferred by technical analysts of the various different moving averages, as it is a balance between the simple moving average, that lags and the weighted moving average that is over sensitive.

The simple moving average gives more weight to the current prices. Therefore it’s advantage is that it is quicker and follows the prices better. The disadvantage is that it ism more prone to whipsaw than the simple moving average.

From the chart you can see the difference between the simple moving average and the exponential moving average.

As you can see the Exponential moving average follows the FTSE 100 closer. The SMA (Simple Moving Average) is less sensitive to price movement.

Now I will show you a spread betting strategy of two moving average cross and how the two different averages react.

You can see above how the exponential moving average crosses earlier than the simple moving average. giving you an earlier short spread betting signal. But it also gives you an earlier signal to close out your trade.

when deciding which spread betting strategy to use. You must decide which moving average will fit your style of trading. You could also mix the two. using an EMA to enter and a SMA to exit.

Next:Weighted Moving average