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Spread Trading as we have already mentioned, helps to reduce market volatility and balances the relation between risks and profit. In order to identify the traded contracts, one has to create a chart and analyze it accordingly, and here is where GeWorko Method comes into play. It grants a unique opportunity for spread traders to effectively develop spread trading strategies, by constricting corresponding charts quickly and easily and use extensive arsenal of technical analysis tools.
Recently, financial markets have become more volatile and choppy. Taking into consideration, increasing risks, uncertainty and less predictability, there is an increased need for new trading methods. Traditional trading strategies working some decades ago tend to be out-of-date.
Let us again define what the term ''spread'' means: it is the difference between Bid and Ask prices of the instruments. The activity when a trader simultaneously buys and sells two financial instruments related to each other (called legs), is spread trading. Here the profit is made out of the difference of the relative price changes of these two instruments. Thus, spread trade includes two equal and directly opposite positions. Spread trading may be used both in the market of Forex, commodities, indices and stocks.
Several types of spread trading may be distinguished: intra-market spreads, and inter-commodity spreads.
It may be concluded, that in spread trading profit is generated from the widening or narrowing of the gap - spread, between the two instruments. One of the keys to success in spread trading is the right combination of instruments, which form the spread. The spread between the trading instruments should generally fluctuate within a certain range; that is why it is important to choose instruments with high correlation and common characteristics. This can be carried out by constructing effective charts and carrying out technical analysis.
Find examples of applying GeWorko Method for Spread Trading Strategies.