Choosing charts

One of the key problems I experienced in the early days of my spread bettin in my career was a poor approach to charting. I'm not talking about any complicated technical analytical charting, rather simply looking at charts to pick up trends.

As we know most simple and perhaps effective spread betting strategy involves the market participant going with the trend, be it buying into a rising market, selling into a falling market or noting the highs and lows of a flat trending market and trading accordingly.

Muddling it up

What I would too often do in the past is log into my spread betting platform, click on my chart of choice and witness a clearly falling market.

Now, does this call for a Sell?

Certainly not. My default chart setting were set at one minute, the implication of this is you can probably at best see the past hour, and the problem of course is that I lose sight of the bigger picture.

Often a down trend in a one minute chart is nothing but a slight pullback in a market trending higher on a daily chart. Perspective is crucial.

So what we need is a simple rule of thumb to integrate into our spread betting strategy when it comes to charts. A little research, and practice, has shown that a simple rule is to follow is to use between a 4:1 and 6:1 time ratio when charting.

So, for example:

If you are trading a daily chart, use a weekly chart to find the trend.

If it is an hourly chart, use a four hour chart to find the trend.

If its a 15 minute chart, use an hourly chart for your trend.

If you are on a one minute chart, use a 5 minute chart for your trend.

However, from experience I would advise to stay clear from the one minute chart!