Spread Betting: Trading USD/SEK
This Forex currency pair compares the US dollar to the Swedish krona, and gives the number of krona that can be bought for one US dollar. The quote is currently around 67,000 which because Forex uses “pips” is actually about 6.7 krona to a dollar. This chart shows how interesting this currency pair may be for the trader: –
As you can see, it has been active in general, but the other item of interest is the length of the candlesticks, showing that there are large changes in value each day. While this can contribute to making large profits, you should also note that it increases the risk, and you need to have a good trading plan in place to compensate.
Some would argue that the United States economy is fatally flawed, and it is only a matter of time before further crises affect the largest economy in the world. Certainly, it cannot continue indefinitely with increasing foreign debts financing quantitative easing programs, even though as the world’s reserve currency it can continue printing more dollars that should remain honoured.
Against this, the US has many natural resources and vast farming projects, and enough expanse of area to find the ideal climate for any particular growing requirements. The US is still regarded as the place to which legal and illegal immigrants will flock, drawn by the prospect of better lives and income. This is despite the fact that unemployment is still high, at nearly 10% of the working population. Taking all elements into consideration, the United States is nearly energy sufficient, and surprisingly depends more on Canada for oil imports than any Middle East country.
Many people don’t have a good picture of the Swedish economy, thinking only about the image of the northern European country. Obviously, Sweden chose not to enter the European currency collective and keep its own krona. In many other ways, Sweden distinguishes itself from other countries. It is in a strong fiscal position, and has social programs that look after its population. Its strong position is partly because it has acted as a neutral country while other nations have been involved in wars which have affected their economies.
Sweden has an excellent standard of living, which combines extensive welfare benefits and a high-tech lifestyle. The labour force is skilled, and foreign trade is good and a wide-ranging part of its economy. It has many resources including timber and iron ore, and its topography is well-suited for generating hydroelectric power. Up until the economic crisis in 2008, Sweden had been prospering, but was set back by world conditions, from which it is now seeming to recover.
Both countries and therefore the currencies are stable, even though there are issues that need to be resolved in the near future to continue on the same path. On the timescale that is involved with spread betting, it is unlikely that there will be any political shakeups or government actions which will disrupt the economies, and therefore it is best to use technical analysis to look for suitable spread trades, assessing market sentiment and betting accordingly.
Spread Betting on the USD/SEK
If you want to spread bet on the US dollar versus the Swedish krona, first you have to realize that this is a volatile Forex pair, and you need to have a good trading plan in place to ensure that you minimize your losses. The current price for a rolling daily bet is 67,412.2 – 67,472.2. If you think that the US dollar is strengthening in relation to the Swedish currency, then you would take out a long bet on this currency pair. Perhaps you would place a buy bet for £2.50 per point. With a typical daily range of several hundred points, is not long before you see the quote is 68,251.7 – 68,311.7, and you decide to close your bet and count your profits. This is how you work out how much you won: –
- Your long bet was taken out at 67,472.2
- Your bet closed at 68,251.7
- The difference in points is 68,251.7-67,472.2
- This works out to 779.5 points
- Your stake was £2.50 per point
- Multiplying out, you won £1948.75
if your bet goes against you, you may have to close it for a loss and cut your losses. Say the price went down to 67,312.5 – 67,372.5, and you decide to close your bet. You work out how much you lost in the same way: –
- Your long bet was taken out at 67,472.2
- Your bet closed 67,312.5
- The difference in points is 67,472.2 less 67,312.5
- This works out to 159.7 points
- Your stake was £2.50 per point
- Multiplying out, you lost a total of £399.25
For a second example, assume that you had decided instead that the Swedish krona was going to gain in value against the US dollar. This would require you to place a short bet, basically betting that the dollar would go down in relation to it. Perhaps you would bet £1.80 per point at the selling price of 67,412.2.
Suppose the spread betting quote went down to 66,351.9 – 66,411.9, and you closed your bet to take your profit. It is again simple to work out how much you won: –
- Your short bet was taken out at 67,412.2
- Your bet closed at the buying price of 66,411.9
- Therefore you gained 67,412.2 minus 66,411.9 points
- That is just 1000.3 points
- Your stake this time was £1.80 per point
- Which means your short bet made £1800.54
Once again, controlling your losses is important particularly when you are betting on a volatile currency pair. Suppose that instead of going down as you had hoped, the spread bet quote went up and you were faced with the decision to close it and minimize your losses. Perhaps the price went up to 67,508.1 – 67,568.1 before you closed the bet.
- Your short bet was taken out at 67,412.2
- Your bet closed at the buying price of 67,568.1
- Therefore you lost 67,568.1 minus 67,412.2 points
- That is 155.9 points
- Your stake this time was £1.80 per point
- Which means you lost £280.62 on your short bet.
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