Continue reading...When it comes to trading, most of it is done by making a directional bet. In other words, if the probabilities are high that the market will decline, we short it anticipating we will make money as it moves lower. Conversely, when the prevailing odds are that a given market will move higher, we buy it with the hope that we will sell at higher prices in order to garner a profit. In addition, to exercise sound risk management we will cut our losses swiftly if the market proves us wrong. This is conventional market speculation.
There is however, a lower risk method to participate in the markets. This method is not as widely known, or practiced for that matter, but can be a viable method to making money in any market. What I’m referring to is what is commonly called spread trading. Spread trading involves buying one contract and concurrently selling another contract in order to profit from a relative change in price in both contracts.
These can be done in the same market, known as...
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