This week’s financial spread betting update is now available and can be read by clicking here.

We wrote last week that we expected an interesting week ahead as there were a series of events that had potentially large impact on the markets and these included the US mid-term elections (which effectively had no impact on the market), the US Federal Reserve meeting where the Fed announced the second round of quantitative easing as well as Bank Of Japan, Bank of England and the European Central bank meetings. Finally, we had the US employment data on Friday!

Also in last week’s update we wrote that the most effective spread betting strategy ahead of major news events is to continue to follow the trend instead of guessing what these announcements would be and what the market’s reaction would be. This once again turned out to be the correct strategy as the news items continued to move the markets in the direction of the prevailing long term trends.

The current long term trends for the major markets sectors are up for stocks, commodities and interest rate futures and down for the US dollar.

This week’s financial spread betting update begins with:

It’s been a very good week for the markets with stocks and commodities pushing higher and the US dollar moving lower. What was being called “Hell Week” by some commentators has turned out well with the markets continuing in the direction of the prior trends. The current conditions for the markets overall are very good and most markets are trending very well…….continue reading by clicking here

Good trading

Phil Seaton

PS. Find out more about our financial spread betting system for stocks, commodities and forex by clicking here. The system comes with a 30 day money back guarantee. Click here to sign up.

This week’s financial spread betting update is now available and can be read by clicking here.

The markets continue to focus on the dollar, which having drifted lower for most of the week began to turn around on Friday. In early trading this morning the dollar is continuing higher against most of the majors and it remains to be seen as to how long this counter trend bounce continues for. However, it’s still to early to put much weight on a short term move such as this.

Since commodities are mostly priced in US dollars, any moves in the dollar will be reflected in most commodity price movements. This is why we saw a move lower for many commodities on Friday as the dollar moved higher. We may see further weakness for commodities if the dollar continues to push higher in the short term but this is a double-edged sword, because as soon as the dollar moves lower again commodities will very likely rebound.

It remains to be seen as to how much further impact the prospect (and much expected) second round of quantitative easing from the US government has on the markets and it may be a case of “buy the rumour, sell the fact”, or in the case of the dollar “sell the rumour, buy the fact”.

This week’s financial spread betting update begins with:

Stocks and commodities have continued to press higher overall and the current situation continues to be all about the US dollar. Many markets were higher earlier in the week but some dollar strength of Friday moved a few markets lower. The long term emphasis remains bearish for the reserve currency and although a bounce higher may be on the cards the long term trend is firmly down so any bounce higher may be relatively short lived….….continue reading by clicking here

Good trading

Phil Seaton

PS. Find out more about our financial spread betting system for stocks, commodities and forex by clicking here. The system comes with a 30 day money back guarantee. Click here to sign up.

Today we’re going to look at the importance of having and following a spread betting system in order to ensure that we catch the big winning trades. We’re going to look at a real world example to illustrate the importance on this and how not following a system negatively affected one of the world’s top traders. In our last post on Stanley Druckenmiller, we commented that Druckenmiller had decided to close his hedge fund due his inability to make outsized returns over the past 3 years which he put down to very unfavourable market conditions.

One of the factors that have negatively impacted his performance this year is that, by his own admission, he missed the move in treasuries. Since treasuries have been the biggest and best trending markets this year that has been a fatal mistake. This does highlight a very important lesson for traders and that is that you must have a trading system, or in our case a spread betting system with specific trading rules and the discipline to follow it consistently.

A good spread betting system should include each of the following:

• Which markets to trade
• When to enter a trade
• When to exit a trade
• How much to stake on each trade
• How to know when to stay out of a market

Once you have a spread betting system that incorporates the above rules, all you have to do is follow it consistently. My guess is that either Druckenmiller was relying on discretionary reasons for entering trades rather than specific rules, or his system indicated an entry but he chose to skip the trades because he did not like them for some reason.

This is in fact where many traders fall down and the mistake can be fatal, as seen by the negative impact that skipping these trades has had not just on Druckenmiller’s performance, but on him emotionally as well and these factors may have led to him calling it a day.

In reality, nobody can be sure when entering a trade whether it will be successful or not and this is why once you have a spread betting system it is important that it is followed consistently. One can never tell in advance when the big moves are going to come and if you skip a trade for any reason and it goes on to be a big trend and a big winner you are in trouble.

One of the underlying principles of successful trading is that it is always better to risk taking a small loss than it is to risk missing a big winning trade. If the spread betting system used is good then only a small percentage of trading capital should be used for each trade, for example 2%.

If one is only risking 2% equity per trade then taking a loss of that amount is not too painful. Conversely, if a trader misses a trade that goes on to be for example a 10 to 1 winner, as may be the case in the current treasury trades then that equates to 10 x 2% of missed opportunity. That is far worse than risking the initial 2% loss. It is compounded if there are a handful of correlated markets such as in the case of treasuries, the 5 year note, 10 year note and 30 year T bond. Missing out on one trade is bad but missing out on all three is fatal. That is why we say it is always better to risk a small loss than it is to risk missing a big winning trade.

Because the markets only trend around 40% of the time all trend following systems will have more losing trades than winning trades. Therefore to make money you must have the big winning trades and ensure that you catch them when they come. If you don’t, you have no way to pay for the losing trades. This is why you must have specific rules to enter trades and rules to ensure that you don’t miss any trades.

Our spread betting systems, whether it is our forex system or our primary financial spread betting system for multiple market sectors both include rules to ensure that big trends are not missed and that trades are allowed to run to extract the maximum profit potential of each move. So, the question to ask yourself is “am I using a good system and do I have the discipline to follow it consistently?”. If you can answer yes to both then you are on the road to trading success.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems by clicking here.

Over the past few years we have had a number of our subscribers ask us to create a forex spread betting system. Although forex is part of the original LS Trader System, our subscribers wanted a system that was dedicated to and optimised for the forex markets.

I’ve been working on creating this forex system for a couple of years now and completed my research on it at around the end of 2009. Since then we have been trading it ourselves to check that the actual trading results lived up to the promise of the backtesting results, and so far this year things have been very encouraging.

As of now the system is up 56.2%, and being that we have had just over 7 months of the year, we are pretty much on target for 100% this year assuming that things continue in their present fashion. This is especially pleasing considering how volatile other markets have been and the lack of trends that we have seen so far this year across most of the financial markets.

Forex has been one of the best performing sectors this year and we have seen some decent trends already. Earlier in the year we had strength in the US dollar, which led to some good winning trades, especially against the Euro and Swiss Franc. Over the past few weeks we have seen a reversal of fortune for the US dollar and the dollar is now moving lower against most of the majors and we are benefitting from this move lower by trading with the trend.

A huge advantage of forex spread betting is that on the whole the forex markets trend very well. Other advantages include tight spreads from the spread betting companies such as and obviously highly liquid markets.

All in all, combing forex markets with financial spread betting and trend following is a very powerful, profitable and easy to use combination. You can find out more about our forex signals here

Until next time, good trading

Phil Seaton

PS. Click here to find out more about our forex signals. We’re currently offering a 30 day all access free trial.

In today’s post we’re going to have a look at some spread betting strategies that can be used for the week ahead in a couple of popular markets that we trade which are the S&P 500 (the primary stock index) and gold.

Let’s begin with the S&P 500. We have been writing in depth about the S&P 500 for the last few weeks and have touched on various spread betting strategies that can be used in this market. Right now this market is at a point of indecision and could go either way. My view is unless you are already in trade in this market that it’s best to wait for a clearer picture once the market has given some confirmation of direction. Long term the trend is down, so I’ll only be using spread betting strategies from the short side.

Another market that has been in focus for us is Gold. Last week the market headed lower but not sufficiently to give a long term trend change to down. Therefore, spread betting strategies from the long side should be favoured but further strength needs to be seen before initiating any new positions in my opinion.

Last week we got new multi-week lows on the December contract at $1159.3 but also got a bull harami pattern, which is not so much a bullish reversal pattern but more an indication that the bears were running out of steam. From there we got a continuation higher to Friday’s close at $1183.9. There should be good support from the 200 day moving average around the $1150 area, but I’d still like to see a break above $1222 before looking at entering long.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here.

Today we are going to discuss spread betting strategies that can be used ahead of a major news item. Later today the second quarter US GDP numbers come out and we get asked frequently about which spread betting strategies we use ahead of such major news announcements.

The answer is actually quite simple. Since we are technical traders and follow mechanical trading rules we are either already in a trade if we want to be in it, or know where we will get in should our entry criteria be hit. We don’t base our trading decisions on trying to predict the news items, or how the markets will react to the news. We simply follow the trend.

Since our spread betting system is a weekly system, we don’t enter trades immediately before, during or after a news item as we are already in the trades that we want to be in. We don’t therefore enter again until the following Monday, using the closing price on Friday as our entry should the price action in the immediately preceding week trigger a buy or sell signal for us. We therefore use spread betting strategies based on a weekly timeframe and don’t concern ourselves with intraday news.

Trading systems are either predictive or reactive. We don’t get involved in trying to predict, but rather react to price action. We know already where we want to get in and where we want to get out based on the price and chart structure. The rest is irrelevant. Should the market exceed the levels that we have predetermined will be optimum for entry, either for long or short trades, then we will enter. If the market does not exceed those levels then we stay out.

Let’s just look at what is expected today as far as the news is concerned out of interest, although we won’t be basing any of our spread betting strategies on it. Economists are expecting that US GDP growth for the second quarter will come in at 2.5%. I expect that it may disappoint and come in lower than that, possibly closer to 2%. If that does happen then we may see a reaction to the news that moves stocks and currencies considerably.

We have already covered this week that the long term trend is down for stocks and have identified a couple of key resistance levels, which are 1118 and 1129 on the September S&P 500. As long as the market stays below those 2 levels then the short and long term trends will remain down and the odds favour lower prices.

Yesterday we got a close below the important 1100 level at 1097 on the September contract and also below the 200 day moving average, which many traders look at. We also had an evening star pattern form on the S&P 500 earlier in the week which is bearish for the short term so various things point to lower prices to come.

What this really boils down to is that you should have a trading plan in place ahead of any news items or price reactions and know exactly what you are going to do and why. Once you have your plan in place then you stick to spread betting strategies within that plan and trade accordingly.

There are many traders and economists that try to predict news items and how the markets will react to the news item depending on what the numbers are. It’s far better in my opinion to just focus on the most important indicator of all, which is the price itself. Then all you have to do is follow the price and the trend.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here.

Today we are looking at bearish price patterns and spread betting strategies. We will base this primarily on the S&P 500 as that is the primary stock index that we focus on. The reason we do this is that the S&P 500 is the real stock market and the other indexes tend to take their cues from the S&P 500.

There have been a few key levels and indicators in the S&P 500 that we have been writing about of late. We have previously been focusing on resistance from 1100 when the market was below that level and also the major resistance at 1129.

Friday’s close on the September S&P 500 contract was bang on 1100 and this week continued the recent short term strength and pushed up above 1100 and the 200 day moving average. This was relatively bullish short term and the market continued higher to 1118 on Tuesday. Critically, this move fell short of resistance at 1129, so the short and long term trends remain down. This means that only bearish spread betting strategies should be considered at this time as the odds favour lower prices.

Considering the recent strength and the fact that this market cleared 1100 and the 200 day moving average we should perhaps have seen more follow through and an actual test of 1129, but the rally fell short. We also have an evening star pattern formed in this market over the last 3 sessions, which is a bearish reversal pattern and suggests a top in the market. When we have an evening star, we use the top of the pattern as resistance, which in this case is Tuesday’s high of 1118. If the market moves above 1118, especially on a close, then this pattern is negated and a likely test of 1129 resistance will probably follow.

Yesterday’s price action also took the market back down towards support at 1100, with a low for the day at 1099.5, before closing at 1102. This is once again right on the 200 day moving average as well as support from the 1100 level. In the short term then this market can clearly go either way and the levels to watch are 1100 to the downside and 1118 and 1129 to the upside.

As long as 1129 resistance holds, this market is in a bearish set up and the long term trend is down, so we’ll continue to favour spread betting strategies from the short side and reject longs for now.

One other point of interest, certainly for UK residents who use spread betting is the bearish formation on the FTSE. The FTSE is not a market that I like because of its lack of trending properties, but I know many traders in the UK follow it. On Tuesday we had a shooting star pattern, which confirmed resistance at 5385, followed by a bearish engulfing pattern on Wednesday. This suggests a top in this market, and as long as 5385 resistance holds then bearish spread betting strategies should also be favoured here. The long term trend in the FTSE is also down, as with the S&P 500.

Until next time, good trading

Phil Seaton

PS. You can find out more about our financial spread betting systems and spread betting strategies by clicking here.

Recently we have been discussing various spread trading strategies for stocks and commodities and the 2 markets that we have been focusing on are gold and the S&P 500.

Let’s begin today with gold. In our last post on gold we wrote that we were looking for a move back up above short term resistance at $1215. We had written that there had been a bull harami pattern on the weekly charts and that this pointed to higher prices in the short term and a test of $1215 resistance early in the week. We got that test yesterday and the market moved up to $1218.8 (August contract) at one stage in the day but was unable to close above $1215.

We may have another go at this level soon and the long term trend is up. In the short term we have support at $1185 and also around $1200, where gold pushed higher from yesterday having been as low as $1196. We don’t currently have a buy signal out in this market but spread trading strategies at present here should be considered only from the long side, in the direction of the long term trend until or unless we get sufficient weakness for a change of long term trend.

Our other market of focus is the S&P 500 (September contract), which has continued to impress from recent lows at 1003.1. Yesterday saw another big move higher and the market now looks set to test what many people consider an important level, which is the 200 day moving average (I’m not a huge fan of moving averages myself). The 200 day moving average current stands at just over 1100, which once again is a round number and a resistance area.

If 1100 can be cleared then a continuation higher to the highs seen on June 21^st around 1130 may follow, where we expect major resistance may be found. As yet there are no reversal patterns showing in this market (or any of the stock indexes that we trade at LS Trader) so short term strength may continue. The long term trend remains down but I will not be selling at present due to recent short term strength even though I expect that to falter in the not too distant future. It’s always best to wait for confirmation from price action before initiating any positions.

Because there is divergence at present between the long and short term trends our preferred spread trading strategy for the S&P 500 is to stay on the sidelines and wait to see what develops. We still view this as a counter trend rally and therefore won’t be buying it as it is against the long term trend.

Good trading

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary trading strategies for spread trading stocks and commodities please click here.

Spread betting stocks and stock indexes update following Friday’s close ahead of the long holiday weekend in the US for Independence Day.

We wrote on Thursday that the next couple of days were of potentially major significance for the stock markets and in particular the S&P 500, which earlier this week finally broke through long term support.

As we have written before, when we have a major trend change or breach of long term support or resistance we like to see the market close beyond the prior support/resistance level at least once and preferably twice to give confirmation. Ideally, we also like to see confirmation from Friday’s close in addition. Friday’s close is the most important close of the week as it represents the level at which traders are willing to hold their positions over the weekend.

On the September S&P 500 contract we saw a new low intra day of 1006.5, slightly lower than Friday’s close at 1014.3. It looks likely that we will get a test of support at 1000 next week, which is a major psychological round number and there is the possibility of a bounce higher from that level although both the long and short term trends are now down. If 1000 fails to hold the market then we look to the next support area around 980.

We have also written previously about the large head and shoulders pattern, which has been forming of late and the break below support this week gives a break of the neckline and points to a large continuation lower. Taking the distance from the top of the head to the neckline indicates a downside target in the 860 region, which is roughly the area of the July 2009 lows. Should the market fall to that level, which seems quite a long way off from here, then the next target would be the March 2009 lows around 650.

This potentially gives a major trade to the downside and would be an extremely profitable trade for those people that are spread betting stock indexes and are willing to go short as well as long. Users of financial spread betting should be equally comfortable spread betting from the short side as well as the long side if they want to increase their spread betting opportunities and profits. If anything, markets fall quicker than they rise, so trading profits can be clocked up quickly.

Good trading.

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our trend following methods for spread betting stocks please click here.

Following on from yesterday’s post on spread betting stocks, we have an update on the stock markets. In yesterday’s post we wrote that yesterday would be a very important day for the stock markets and it was, but today and tomorrow are now possibly even more important.

As we had written previously, there was major support on the S&P 500 at 1034.8 and this was broken briefly to the downside on Tuesday with new lows at 1030.5 on the September contract. At that point the market had not closed below support but closed just above long term support at 1035.8. Yesterday however, the S&P 500 broke lower again, reaching new lows at 1023.20 and closing at 1026.6 for a new low close this year.

We have written previously that at key points when we get a potential long term trend change that we like to see 2 closes below the prior support and we got the first of these yesterday. If we get another close below support today then that may really open things up for a downside break much lower and this would perhaps be confirmed by the most important close of the week, which is Friday’s close. This Friday’s close carries extra significance as it is ahead of the long holiday weekend in the US for Independence Day.

It is possible that if the market rallies today a bit and closes above yesterday’s highs around 1045 that we may get a crack and snap formation and the market may rally from there for a couple of weeks before we get a major break to the downside towards the end of July.

For now, the Dow 30 and Nasdaq 100 have both held above key long term support (around 9670 on the Dow September contract and around 1728 from the February lows on the Nasdaq) and so that adds to the possible bounce scenario. We will have to wait and see what happens during the rest of today and tomorrow. As ever, we will wait for the market to tell us where it wants to go and then jump on board in the direction of the trend and ride that trend.

Good trading and good luck with spread betting stocks

Phil Seaton

PS. To find out more about the LS Trader financial spread betting system and our proprietary trading methods for spread betting stocks please click here.