Short-Term Spread Bet Trader Profile - How Short-Term Traders Make Money

For those that don't quite fit into the mindset of the ultra-short-term day trader, all hope is far from lost. Those that think short-term don't need the restriction of a day, and many traders in this scenario find opportunities in slightly longer short-term positions that meet a good mix between profit potential and the presence of risk. While the fundamentals of why they trade short-term remain constant, more flexible short-term traders have a range of devices at their disposal to wedge a profit from the markets.

How They Trade

Short-term spread bet traders look to make profits in an environment where the corresponding risks are less severe. The time frame manipulation of traders highlighting their durational preferences is strategic, with preference shown to positions that come and go over a period too short to allow serious, capital-threatening damage to occur. While this is good logic, it's important to bear in mind that trading short-term means you invariably have to trade more often to achieve the same ends as with longer term trades. In this respect, the trade off is one between lower risks or greater per transaction profits.

What They Trade

Daily rolling bets can be used beyond the strict parameters of day trading by other short and medium term traders. A spread betting position in daily rolling bets is flexible enough to give full control overnight, but also suitable for a variety of short term trading purposes and therefore it is commonly used towards trading markets over this kind of time frame. For an alternative, with a slightly longer-term view, monthly futures bets are a good option for those trading over the short term because the double layer of leverage in the transaction makes for volatile, potentially profitable trading over the short to medium term.

Advantages of Short-Term Trading

Short term trading is considered by many new traders to be a less risky way of getting stuck in to the markets, and in large part this carries some merit. The less time your capital is exposed to the market on a single transaction, the more unlikely it will be that you'll suffer total market collapse and lose heavily. This is known as market risk, a threat to capital which is reduced by the nature of being involved in positions over a shorter time frame. For those moving beyond the day-long timeframe, or beyond a couple of days, daily rolling bets can be substituted for more flexibly timed instruments to remain both cost-effective and optimised for short term trading.

Disadvantages of Short-Term Trading

Short-term traders generally have to work harder to generate comparable returns. The short-term nature of transactions mean there is less time and scope for profits to be made. This translates as more thinking time, more research and more planning, to achieve similar levels of results. A short-term approach should also be considered more expensive on a per trade basis, given that spreads are proportionately more substantial a cost than with larger, longer-term trades.