The financial crisis has certainly resulted in a market increase in volatility across all asset classes. As the Euro currency reaches a 16-month low against the Dollar, the eurozone crisis persists, leading to bearish trading on the EUR/USD currency pair. Spread traders love volatility and as a result trading volumes have continued to soar. And certainly the persistent volatility has attracted more and more people to try their hand at this alternative means of speculating the financial markets than ever before. In the last year most companies have witnessed huge volume increases across the three main product classes: shares, indices and forex trading. Clients take profits or losses quicker when markets move a lot. While this increases trading volumes, experienced traders tend to reduce their stake sizes to adjust for the increased volatility, maintaining their same risk profile.

Obviously movements in the financial markets helps to uncover more trading opportunities for spread betters but too much volatility can hurt even the most astute of spread bettors. In very volatile times I tried trading in and out of shares to capture the volatility but opening spreads and overall market moves made that profitable on some days and a waste of time on others, so I invoked the plan and ceased trading any stock where I had lost money three times in a row. In this sense volatility is very much a two-edged sword. Much depends on the trades taken by investors and the trade sizes. Volatility does tend to bring attention to the financial markets and financial spread betters are all to ready to take an opportunity to make profits.

The recent volatility has been particularly good for short term traders, though not necessarily a good thing for those with a buy and hold investment philosophy. In any case the ability to go short gives share traders the power to profit from falling markets as well as rising ones and in this respect spread betting is very flexible. However, even though clients always have the ability to trade both long and short, most investors still seem to have a natural bias towards buying positions.

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Trader’s Rant: Spread Betting these Volatile Markets

The ruthlessness of the market 1 wrong call can do that to you, I’m astonished at the size of stops hedge funds firms use, a lot of the so called geniuses from 08 have lost billions this year; a lot of the time the term hedge fund truly amuses me because I can tell you hedging is something they seem not to do, in my talks with people it basically boils down to if you’re making money they don’t give a **** how you’re doing it – you could be up Ladbrokes all afternoon for all they care!

So day traders get vilified oh it’s impossible to day trade bla bla bla, how on earth are people who trade normally getting on in these markets, just going through a few highly traded stocks, Barclays for example; I can imagine a fair few spread betters bought with the euro news and the break of 200,those with a 10% and 15% stop loss have already being burned with a 20% loss you’re biting your nails, Rio Tinto is a similar story – same again at Antofagasta – all highly traded stocks that Joe Public would be buying, keep on chopping in stocks may keep you out of really big trouble but that’s not how Joe public would trade and even so it’s still eating into your trading pot, unbelievably difficult markets to trade!

Financial spread betting involves taking a position on the movements of financial instruments such as forex pairs, global indices, shares and commodity prices.  The bigger the market movement, the bigger the potential gain and this drives traders to trade more to try to make money from the volatility.