EUR/GBP Spread Betting

As both the UK with the pound sterling and the European Monetary Union with the euro have struggled in recent months to sustain growth and avert financial catastrophe, when you are spread betting on the EUR/GBP you will need to keep a close eye on the political news. At the moment, you can see from the daily chart below that the uptrend is clearly broken, and the trendline of the previous uptrend is now being tested as resistance from below by the long blue candle on the right.

Forex Spread Betting: EUR/GBP

As a reminder, the first mentioned currency is the base currency, so the numbers on the right indicate that one euro is approximately equal to £0.8.

When you are spread betting on a volatile chart such as this one, where the price may trend either up or down, you need to become aware of significant levels that can become support or resistance levels. In this respect you need to look back historically for confirmation of the significance. Opinion varies on whether to count the full extent of the lower wick, or simply the real body. Minor incursions by the wick are often put down to simple fluctuations, which interpretation means that the support level being hammered out on the right-hand edge is approximately 7954. The many short candles at this level imply that this is likely to be a true reversal and a start of another uptrend, but a wise trader would normally wait for a more definite signal.

Although this level occurred in the chart previously as a resistance just above “Sep”, it is interesting to see that when it was broken, it was with a decisive one-day move, the long blue candle, which opened at 7929 and closed at 8006.

The MACD plotted below the chart provides some good clues to the subsequent price action, and decisive moves, as indicated by longer bars, have been shown to be fairly reliable.

Forex EUR/GBP Rolling Daily

Placing a spread bet on the EUR/GBP allows you to express your opinion on which of the economies are doing better, the European ones or the UK. Certainly there are many different facets to the euro, given the number of member countries of the European Monetary Union, and some of them are struggling. That said, the UK’s economy is not performing well, so this currency exchange pairing becomes a decision of which is “less bad”. You should study the technical analysis of the chart so that you can be aware of the market sentiment at any particular time.

The current price for a rolling daily bet on the EUR/GBP is 7986.2 – 7987.2. If you are bullish on this relationship, thinking that the euro will rise in value, then you could place a long spread bet at 7987.2, staking perhaps £2.50 per point or “pip”, as it is termed in Forex circles. If you are correct, you might choose to close your bet and collect your winnings when it reaches 8136.9 – 8137.9. The price has risen from 7987.2 to 8136.9, a difference of 149.7 points. At your level of wager, this would win you £374.25.

It is not unusual to be wrong on a trading decision, so you might find that you need to close your bet and accept your loss if the price drops to 7863.5 – 7864.5. Working this one out, the starting price was 7987.2, and the close was at 7863.5. That would be 123.7 points lost, which would cost you £309.25.

Another way of closing a losing bet is to set a stoploss order, usually placed when you take out the original bet. Using a stoploss, your bet might have been closed at 7882.6 – 7883.6. 7987.2 minus 7882.6 is 104.6 points. Multiplying by £2.50, your losses would be £261.50.

EUR/GBP Forex Spread Betting: Futures

Futures based spread bets usually have a larger spread than the rolling daily bets, but are valid through to the expiration date without any maintenance charges to your account. They are usually worth using as an alternative to the daily bet when you expect to hold the bet open for some weeks or months. The current price for a far quarter bet on the EUR/GBP is 8003.2 – 8011.2. If you want to take a bullish view on the pound sterling, which is the same thing as a bearish view of the euro, then you may want to place a sell or short bet for £1.50 per point.

First, consider that your bet turns out to be a winner, and you close it to collect your profit when the price is 7793.1 – 7800.6. To figure out how much you have won, you simply take 7800.6 away from 8003.2, giving you 202.6 points. For your chosen bet, this would be a win of £303.90.

Secondly, perhaps your bet will not win, and you will need to close it for a loss. Perhaps you see the price go up to 8165.7 – 8171.9, and decide that you need to exit this bet. Your starting price was 8003.2, and the bet closed at 8171.9, which means you lost 168.7 points. Multiplying by £1.50 per point, your loss is £253.05.

When you trade, you need to keep your losses as small as you can. No one can avoid having losses, but to make a profit overall you need to win more than you lose. It is worth considering placing a stoploss order when you take out your bet, as this will close a losing trade for you quickly. Perhaps it would have closed this one when the price was 8126.2 – 8133.9. The loss would now be 8133.9 minus 8003.2, which is 130.7 points and would cost you £196.05.

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