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I have finally got my trading system for trading the USA markets tested and I’m now running it live using spread bets in the United Kingdom.
The key to trading the USA markets is to use wide stops and only trade when the markets are open. There is no point to trying to trade a system with a 0.5 ATR (average true range) stop or the like with spread betting; the risk of getting stopped out is too great. I use 6 ATR and this works fine. The only drawback is that you have to trade longer term trends.
Also, take some care when choosing markets. It is a good idea to calculate the rollover costs before entering a trade and one should only then decide on the markets to trade. There are some markets where rollover cost don’t really amount to much but some other markets might be expensive to rollover ($1000 and more for me a year).
The other rule that I’m adhering to is only trade on the next day open. i.e. I apply a stop loss only to end of day data. Having said that I only have a small number of stops in place and they don’t change too often.
With long term system one has the advantage that my trading system order generation calculates the distance to the stops. I ignore all markets where the distance proposes that the stop won’t be hit which saves much work. Trading longer term trends also means that the wider spread of some spread betting providers won’t affect the returns of your system.
Last tip: Always (!) compare backtested performance with your betting performance. My worst nightmare was when some positions had really false risk/bet sizes. It took me some days to find out. It happens as you maybe didn’t adjust bet size to backtested equity on entry day. I would recommend to check your spread bets often.
Contributed by the author of Financial Spreadbetting Explained, the award winning free online trading guide with tips, tools and tactics to help you make the most of your financial spread betting.
Article Source: Ezine Articles