Spread Betting on IG

Report
Understanding how to spread bet
using the IG.com spread betting
demo account
Christopher Annett ([email protected])
Spread Betting Ticket
If you are happy to deal at the current price you can deal there and then. Click into the product
you wish to trade and then enter the size amount (amount per point). With shares, £1 per point
is the equivalent exposure to owning 100 shares. You can place a stop which will reduce your
margin, you can choose a guaranteed stop which will increase your spread by 1 point and you can
choose a limit.
In this example to buy
EUR/USD, €1 = $1.24683.
A pip is the 4th number after
the decimal place, in this
example 8.3. A point move in
currency trading is a pip
movement. So if the sell
price moves to €1 =
$1.24693, then you make 1
point. At £10 per point, you
would make £10.
Deal Stop and Limit
A Stop is an instruction to deal at a less favourable level than the current price. A Limit is an
instruction to deal at a more favourable level than the current price.
Let’s say the current price for the FTSE100 is 6699 (sell) 6700 (buy).
Buy stop kicks in
at 6709 – lose 10
points
Sell limit kicks in
at 6710 – gain 10
points
Go short at 6699
Go long at 6700
Buy limit kicks in
at 6689 – gain 10
points
Sell stop kicks in
at 6690 – lose 10
points
It may be more convenient to leave an instruction to deal should a specified price requirement be
met. A buy stop has to be above the current buy price and a sell stop has to be below the current
sell price. A buy limit has to be below the current buy price and a sell limit has to be above the
current sell price. You can then place contingent stops and limits.
Order to open Stop and Limit
If you set a contingent buy stop when neutral (no open positions), then the
stop will be below and the limit will be above the order level. If you set a
contingent sell limit when neutral, then the stop will be above and the limit
will be below the order level.
Buy stop must be
above current
buy price
Sell limit must be
above current
sell price
If short or neutral
If long or neutral
Buy limit must be
below current
buy price
Sell stop must be
below current
sell price
Margin Requirements
The margin is always a fraction of what it would cost to buy the assets directly. Margins are
calculated differently depending on the product and market. A 10% margin means that for just
£10 you get the same exposure as a £100 investment. This represents a leverage of 10 times, or
10:1. So if the investment goes up by 20%, to £120, you have made £20 on a £10 investment or
100%. Margins are reduced by stops and by guaranteed stops (extra spread).
No Stop
Bet size x margin factor
10 x 23 = £230
With Stop
(Deposit requirement for no
stop x slippage factor %) +
(bet size x stop distance from
current level)
(£230 x 0.20) + (£10 x 6) =
£106
Maintaining Margin
With IG if the account equity (cash balance +/- running profit/loss) doesn’t cover your margin
requirement, they may partially or fully close your positions. In this case the equity (£14,462 - £5)
easily covers the margin of £230.
Time Frames
Under daily you can choose the candlestick time frame or choose tick data. Choose the time
period you are interested in trading, say daily, and then use a shorter time frame, say 4 hours to
determine when to place the trade.
Technical Tools
Aroon is an indicator which that helps investors identify trends and their strengths. A 14 day
Aroon looks at how long it has been since the 14 day high and 14 day low. If the number of days
since the last 14 day high is zero, the Aroon up line (green) will be at 100. If it is 1 day it will be at
92.9. When the Aroon up line is above the Aroon down line the overall trend is considered up,
and vice versa.
FTSE 100
Average True Range (ATR) graphs measure the volatility of financial instruments. A high ATR
indicates high volatility and a low ATR shows low volatility. The ATR is the moving average of the
greatest of the following: current high minus the current low; the current high minus the previous
close; the current low minus the previous close. Periods of low volatility are usually followed by
periods of high volatility. Traders should use larger stops and profit targets as ATR increases.
FTSE 100
The Awesome Oscillator compares market momentum over a 5 period moving average and 34
period moving average. Buy saucers occur when there is a temporary reversal of 2 bars and then
the trend continues in the same direction. A nought line crossing can be bullish (if above 0) or
bearish (if below 0). Two pikes sell signal occurs when the second peak above the zero line is
below the first peak. Two pikes buy signal occurs when the second peak below the zero line is
higher than the first peak.
Saucer
Germany 30
Peak 1
Peak 2
Bollinger bands are envelopes based on a moving average and a standard deviation. In a ranging
trend, Bollinger bands represent support and resistance. If the bands squeeze and the price is
hugging the bottom band, this is bearish and vice versa. If the price significantly penetrates the
upper or lower band this could signal overbought or oversold.
FTSE 100
Chaikin’s volatility indicator calculates the volatility as the trading range between high and low
prices for each period. This calculation does not take trading gaps into account when quantifying
volatility. Very high volatility can be associated with trend reversal.
FTSE 100
The Commodity Channel Index (CCI) is a technical indicator which measures an asset’s current
price in relation to its average over a given period of time. CCI values of above 100 typically mean
that prices are unusually high compared to the average and vice versa. In a ranging trend this can
signal overbought or oversold. Alternatively it can signal a strong upwards trend or a strong
downward trend.
FTSE 100
The Detrended Price Oscillator (DPO) attempts to filter out long term price trends in order to
highlight the underlying cycles of price movements. Go long when the price crosses above the
zero line and go short when the price crosses below the zero line. When the oscillator shows a
higher trough expect an upturn and when the oscillator shows a lower peak expect a downturn.
FTSE 100
The Directional Movement Indicator (DMI) indicates when a definable trend is present. When the
ADX line is increasing, it indicates the trend is strengthening. When the ADX line (black line)
moves above the +DI (green line) and –DI (red line) it signals that the market is becoming
overheated. +DI rising above –DI is bullish when the ADX line is increasing and –DI rising above
+DI is bearish when the ADX line is increasing.
FTSE 100
The Exponential Moving Average (EMA) is similar to the simple moving average, except that more
weight is given to the latest data. EMAs help confirm the trend – short, medium and long term. A
simple strategy is to buy when the price closes above its EMA and vice versa. A bullish crossover
strategy occurs when a shorter term EMA moves above a longer term EMA and vice versa.
FTSE 100
The Ichimoku Cloud is a versatile indicator that defines support and resistance, identifies trend
direction, gauges momentum and provides trading signals. Bullish signals occur when the price
moves above the cloud and when the red line crosses above the blue. A purple line above all
other indicators is bullish confirmation.
FTSE 100
The KDJ indicator is essentially a stochastic indicator with an extra line, marked J. A negative value
of J (green) with K (black) and D (red) on the bottom range indicates an over sold condition. A
value of J above 100 with K and D on the top range indicates an over bought condition. K moving
above D is bullish and vice versa.
FTSE 100
Moving Average Convergence Divergence (MACD) is a trend indicator. A bullish signal occurs
when the MACD (blue line) crosses above its signal line (red line) and vice versa. A divergence is
bearish when the stock price makes new highs while the MACD fails to make new highs.
Germany 30
The momentum indicator is a speed of movement indicator, used to detect trend weakness and
likely reversal points. The indicator shows trends by remaining positive while an uptrend is
sustained and negative while a downtrend is sustained. A bullish signal occurs when momentum
crosses above zero (goes green)and vice versa.
FTSE 100
Drawing Tools
Use drawing tools to help plot support and resistance. Trend lines are support in an uptrend and
resistance in a downtrend. Fibonacci is plotted at the beginning and end of a trend and shows
potential retracement levels. Gann fan’s are plotted from a pivot point and provide major areas of
support and resistance.
Alerts
For many indicators you can set an alert which tells you when a condition has been met.

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