Effective Chart Patterns for Profitable Financial Spread Betting
There are zillions of chart patterns that we could discuss here. But I can tell you from my own extensive experience that most of them simply don't work. Betting on most of the so called "secret" stock patterns that are peddled by many spread betting "gurus" would end up losing you money. You don’t want that! To grow your spread betting funds, you need to equip yourself with trading techniques that give you an edge over other traders out there.
Here Are The Chart Patterns To Multiply Your Spread Betting
• Double Bottom and Double Top Reversal Patterns
The double bottom chart pattern takes shape after an extended
down trend. As the name suggests, it consists of two consecutive lows
that are roughly equal, with a peak in between. When complete, the chart pattern looks like a ‘W’. To use this for practical financial spread betting, the trick is to wait for the chart pattern to complete. This is confirmed when prices close above the modest peak between the troughs. Once this happens, pro spread betters look to enter long trades, betting that prices will rise.
For example, a pro spread better would have spotted the major double bottom that occurred in the FTSE 100 in the summer of 2004. Look at the chart below and see if you too can spot it.
As the chart shows, the FTSE 100 displayed the double bottom after it had been falling for some time. The first bottom came in late July, followed by a rise to 4432.50 in early August before prices returned to make another bottom in mid August. Once prices rose above 4432.50 in late August, that was the cue for Spread betting pros to enter the market with buy bets.
What sort of spread betting profit should you expect from a double bottom?
If you place a bet following the confirmation of a double bottom, you can estimate the expected minimum price target by measuring the distance between the price trough (bottom) and the intervening peak. In the case of the Footsie above, the pro spread better would be looking for at least 149.5 point profit (i.e. 4432.5 – 4283). And as you can see, the Footsie delivered way in excess of this minimum price target of 4582
(i.e. 4432.5 + 149.5).
The double top is just a mirror image of the double top
described above. So, when fully completed, it looks like an ‘M’. This occurs following an extended up trend and confirmation occurs when prices break lower than the modest trough between the two peaks. Once this happens, pro spread betters look to enter short trades, betting that prices will fall.
• Head and Shoulders (H&S) Top and Head and Shoulders Bottom Reversal Patterns
The H&S Top consists of 3 successive peaks and would resemble three bottoms (with the middle dip being more protracted than the two on either side. A real life example is provided below.
This H&S bottom occurred in the Dow in 2003 and formed the foundation for the strong rally that ended the bear market. Profitable financial spread betting requires patience. The pro spread better would have waited for the pattern to be confirmed. This happened when prices closed above 9077 and found support around there. Then and only then was this major trend reversal signal complete. All that remains is to open long spread betting positions.
What sort of spread betting profit should you expect from a Head and Shoulder pattern?
If you place a bet following the confirmation of the pattern, you can estimate the expected minimum price target by measuring the distance between the middle price trough and the highest peak between the dips. In the case of the Dow above, the pro spread better would be looking for at least 1880 point profit (i.e. 9077 – 7197). This gives a minimum price target of 10957 (i.e. 9077 + 1880). Not a bad gain for such simple financial spread betting strategy.
Of course, these chart patterns don’t occur every day but when they do, there’s no better way to get a free lunch! Who ever said financial spread betting had to be complicated!
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