Spread Trading - A Profitable Trading Style

like any financial trading allow traders to speculate on the upward or downward movement of an underlying financial instrument e.g. equities, equity indices, currencies or commodities. One aspect that makes it different from other forms of tradition method of dealing in stocks and other markets is that spread trading involves only the performance or price movement of an instrument and does not involve physical delivery of the instrument.

Important factors affecting spreads (prices and price changes) include:

* Seasonality that is the tendency of a spread or net position to behave certain ways at specific times of the year

* Fundamentals such as supply/demand factors

* News

* Technical chart factors such as support, resistance, trends, etc.

Key Benifits To Spread Trading

* Margin requirements are very low, providing traders with considerable leverage and therefore an attractive risk return relationship

* "Selling short" allows you to make money in falling markets

* Trading directly on the markets in real time

* Investment product diversity

There are four different types of spreads:

* Inter-market spreads

* Calendar spreads

* Bull spread

* Bear spread