Financial Spread Betting Guide to Charts

Spread Betting
Financial Spread Betting Guide to Charts

Financial Spread Betting Guide to Charts

A financial spread betting guide to using charts by Tradefair.


How to Use Charts




Charting, or technical analysis, is one of the main ways to spot trading opportunities. It involves looking for trends on price charts and trying to trade in the right direction by following them.


Charts Overview



The following example charts are built from the bid price quotes made on the Tradefair financial spread betting platform. This in effect means that, from the chart point of view, any activity that occurs outside of the market trading times is deemed not to have happened.

Most of the chart functionality is self explanatory and you will find that you learn more about its possibilities, and limitations, with practice.

Most spread betting platforms offer charts for the majority of markets they offer. You can typically follow the action in real-time across a range of time scales to suit your trading needs.


Opening a Chart



To open a chart in the desired market you just click on the chart icon, circled in red below, next to the order button and this will open the default chart selection in the desired market.

The default setting is currently a 10 minute chart with no technical analysis attached.


Trading Screen Chart



Drawing Lines

To draw a new line, simply click on Line Drawing Chart Icon then click on the start point of your line on the chart and then click again on the end point of your desired line.

To draw a horizontal line, simply click on Horizontal Line Drawing Chart Icon then click again on the chart and a horizontal line from that point will appear.

To draw a line that is parallel to one already created, click on Parallel Line Drawing Chart Icon then click on the line you want to copy and then click again at the point where you want your new line to traverse.

To move an existing line, click on Move Existing Line Chart Icon then, after clicking on the line you want to move, click again at the point you wish to move the line to.

To delete a line or lines click on Delete Line Chart Icon then click on the lines to be deleted

Candlestick Chart Settings


Candlestick Chart Save Templates
To create a retracement line array, click on Retracement Line Array Chart Icon then click at the top of the range and then click at the bottom of the desired range. An array of technical support levels will be created. These retracement levels are set at 100%, 61.8%, 50%, 38.2%, and 23.6% and give the exact price at which the price is reached.


Settings

Click ‘Settings’ to bring up the technical analysis tools.

By filling in the various boxes, your desired analysis will immediately appear on the screen. These settings can be saved as either an individual chart save, by clicking Save Chart Icon, or the individual analytical tools can be saved by clicking Save Analytic Tools Chart Icon

Once you have created the analytical tools required, you just click on Save Chart Icon and then click on either delete or save. A new box will appear. Add the name you want to give your analysis (for example: “2way moving average with Bollinger”) into the ‘Templates to be saved or deleted’ section and then click on ‘Save’.

If you want these analysis settings to be applied to a new chart then click on Save Chart Icon and then “2way moving average with Bollinger”. Alternatively, you may not wish to save anything. Just close the chart and everything is removed.


Saving Your Chart

To save a chart merely left click on Save Analytic Tools Chart Icon in the bottom left hand corner of the chart.

Tradefair servers will save any single chart per market. The save button will save your chart with all its lines and analysis BUT when you load up the chart it will be recreated with the default 10 minute setting. To get to your exact chart you must change the ‘period’ to your desired setting.


Printing Your Chart

Once you have created your chart you may wish to print it. Just click on Print Chart Icon and a print preview page will appear and then you just click print.



Technical Analysis Available with Charts





With most charts you can apply a variety of technical indicators to the financial spread betting charts in order to help you spot trading opportunities.


Simple Moving Average (MA)



A simple moving average is the unweighted mean of the previous n data points in the time series. For example, a 10-day simple moving average closing price is the mean of the previous 10 days’ closing prices. The larger the value of n, the greater the smoothing effect and the more the MA line is displaced from the original data.


Exponential Moving Average (EMA)



An EMA is an exponentially weighted mean of previous data points, the parameter of which can be expressed as a proportional percentage. For example, a 10% EMA has each time period assigned a weight that is 90% of the weight assigned to the next most recent time period.


Bollinger Bands



The Bollinger bands are envelopes based on a moving average and a standard deviation which makes the bands widen or narrow relative to the current market volatility.

95% of price action will take place within the Bollinger bands and thus the bands act as strong areas of support and resistance. It can be possible at times like this to successfully trade the price rising or falling from one Bollinger line to the other.

When a trend begins and the volatility of the market increases the spacing of the Bollinger bands will widen, as the trend slows down the Bollinger bands will narrow.


Parabolic SAR



The Parabolic SAR is an indicator devised by J. Welles Wilder, who also created the RSI and DMI indictors. The Parabolic SAR, or ‘Stop and Reversal’ as it’s otherwise known, is generally used for setting stops and following a trend in the market.

Wilder himself recommended establishing that a trend was in position first by use of other indicators such as the ADX indicator and then using the Parabolic SAR to trade in the direction of the trend. If the trend was up, then buy when the indicator moved below the price. If the trend was down, then sell when the indicator moved above the price.

The SAR direction is always the same during a trend and the trend stays in place while the SAR points stay above or below the price. When the price penetrates the SAR then a signal is given to exit the current trade and possibly look for a position to take up a new trade in the opposite direction.

The dotted line produced on a chart by the Parabolic SAR can be used for setting a trailing stop on a trade. At the beginning of a move there is always a greater distance between the price and the SAR giving much needed leeway, however this will narrow as the trend continues therefore giving tighter stops as the price moves in a favourable direction.


MACD



MACD measures the difference between two moving averages. A positive MACD indicates that the 12-day EMA is trading above the 26-day EMA. A negative MACD indicates that the 12-day EMA is trading below the 26-day EMA.

If the MACD is positive and rising, then the gap between the 12-day EMA and the 26-day EMA is widening. This indicates that the rate-of-change of the faster moving average is higher than the rate-of-change for the slower moving average. Positive momentum is increasing and this would be considered bullish.

If the MACD is negative and declining further, then the negative gap between the faster moving average and the slower moving average is expanding. Downward momentum is accelerating and this would be considered bearish.

There are three common methods to interpret the MACD:

Crossovers

When the MACD falls below the signal line, it is a signal to sell. Vice versa when the MACD rises above the signal line.

Divergence

When the security diverges from the MACD it may signal the end of the current trend. For instance, price may continue to make higher highs while MACD makes lower highs. This is an example of bearish or negative divergence and a warning that the up trend may soon be finished.

Overbought/Oversold

When the MACD rises dramatically, with the shorter moving average pulling away from longer term moving average, it is a signal the security is overbought and will soon return to normal levels.


RSI



Another indicator that you can apply to Tradefair spread betting charts is the RSI. This is an extremely useful, reliable indicator and a favourite of many traders.

In general terms the RSI is an overbought/ oversold indicator. In practice, below 30 is considered being an oversold indication and when the RSI crosses 30 to go up, this is a buy signal. At the other end of the scale a value above 70 is considered overbought and when the RSI crosses to go below this, it gives a sell signal.

It should be noted that the RSI will form chart patterns similar to those found on the main chart, such as a double top, head and shoulders etc which may not show up in the stock/indices price, but which should give an indication as to pending change ahead.

The RSI will also form support and resistance levels, just like the main chart and it may also diverge from the main chart direction indicating change. For example, the stock/index may make a new high, but the RSI doesn’t - this is a bearish indicator.

Conversely the stock/index may make a drop to a new low with the RSI moving sideways or upwards - that’s a bullish indication. In these cases the price will usually follow the direction that the RSI has just shown.


Williams %R



One use of the Williams %R can be on trending days, where the indicator can be used to establish entry points into the trend.

It should be remembered that the Williams %R is just an indicator and an overbought or oversold indication on it does not necessarily mean that the price is about to turn. It is better to wait for the price to actually show a marked reversal and then use the Williams %R as a confirmation of this.


Momentum



Momentum refers to the impetus, or increased activity, on an item such as a stock or index. This can be referred to as gaining momentum or losing momentum.


Volatility



For this indicator, we must choose a period, the last 10 days for example. Then we calculate the variation of every day during this period. Then we calculate the napierian logarithm and the variation on this data. By extrapolation, we obtain the historic volatility in %.


Price Oscillator



The Price Oscillator is calculated by subtracting the short moving average from a long moving average. In its percentage form, the result is divided by the short moving average and multiplied by 100. The parameters are the numbers of days of both moving averages.


Standard Deviation



The units of the standard deviation are the same as the units of the original data making the standard deviation a linear value. The standard deviation is the square root of the variance. It is a measure of dispersion, and often used as a volatility indication.

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Financial Spread Betting: The Trend is Your Friend



Trends can continue for a long time in the financial spread betting markets.

The accompanying chart shows an up-trend in a company’s share price.

Drawing a line through the major low-points gives us a ‘trend-line.’

You might try and profit from this up trend by doing a ‘buy’ trade, perhaps when the price touches the trend-line.


Candlestick Chart Up Trend



Support and Resistance



When a lot of buying or selling happens at a certain price, that level often becomes an important barrier on the chart.

A barrier that stops a price from rising is called ‘resistance’ and a barrier that prevents it from falling is called ‘support’.

Resistance is where sellers overcome buyers, while support is where buyers overcome sellers. These levels are usually considered to be very important in the financial spread betting markets.

A resistance level is shown as (a) on the accompanying chart, while support is shown as (b).

Once you identify these levels on a chart, you can use them to plan your entry and exit into the market, and also where to put your stop loss.

For example if you were trading on the UK spread betting markets, you could decide to buy when a price falls to an important support level and sell when it gets near a resistance.


Candlestick Chart Support / Resistance




User Questions and Answers on Using Charts



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'Financial Spread Betting Guide to Charts' last update by James White, 20-Feb-2017





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