This strategy is very similar to the previous one, but in the opposite direction. The idea is to take out a short position, selling a weak security, with the trigger for the trade being the end of a retracement (upwards) and the resumption of a downtrend.
Use Spread Betting To Short The Falling Markets
With all the doom and gloom in the financial world, it’s hard to see how you can trade profitably these days. But for traders in the UK, spread betting provides a accessible tool to short sell the falling markets, tax free (tax laws can change remember).
Any spread betting company will provide you the facility to buy or sell any market your interested in. So there would be nothing to stop you from short selling the FTSE or HBOS or any other market you feel is going to drop in value.
This is what makes spread betting such a flexible and powerful tool. You can use it not only to trade on market gains, but to trade on falling markets.
The prerequisites you can set for this spread betting strategy to be considered are that the market as a whole should be going down, the security you are watching should be going down strongly, and the sector, if appropriate, is also in a downtrend. Thus everything points towards the price continuing to fall.
Now you should watch the security for a retracement, which in a downtrend is a rally in the price, and the rally is likely to stop at one of the levels given in the previous strategy, 33%, 50%, or 67%. Watching the price carefully, you can take your entry signal as the price dropping below the lows of the last few days signifying the resumption of the downtrend. In this case, you would be selling the security, looking to profit from a fall in value.
If you are spread betting in a financial market where there is no sector, such as foreign exchange, you would simply look for a weakening currency and wait for a retracement, selling the position when it appears that the weakness has resumed.