The Swedish 30 Index, which is also known as the Sweden 30 by some spread betting providers, is an index based on the top 30 companies traded on the Stockholm stock market. It presents an interesting alternative to spread betting on the major indices, and has its own unique characteristics that you may find attractive when some other indices are not presenting many opportunities.
The Swedish economy is generally robust, even though it is heavily based on exports and thus dependent on the world economic conditions. There are some major companies based in Sweden, such as Volvo, which is not only known for its automobiles but is also the second-largest truck manufacturer in the world. Sandvik, which is the largest maker of metal cutting tools in the world, is also listed in this index.
Surprisingly, however, each of those companies amounts to less than 4% of the index. There are four other companies which have more than 10% each, and these are Ericsson, Hennes, Moritz, and Nordea. The index as a whole seems to be dominated by manufactured goods and communications equipment, much of it manufactured for export.
The Swedish 30 has suffered some major fluctuations. It dropped a lot during the world economic crisis, swung up by 20% in 2010, which was the second-biggest gain in the developed markets, but then proceeded to give most of it back again in the following year.
All this may sound exciting for spread trading. With the capability of betting equally well on an up or a down market move, all the spread better has to do is determine which direction is most likely, and then place a bet.
Of course, financial trading is never quite that easy, and the first thing you need if you’re going to spread bet on the Swedish 30 is a tried and tested strategy, and an accompanying trading plan. You can develop these yourself by watching the movements of the index for a couple of weeks, testing out different technical indicators and seeing which tends to best reflect the continuations and reversals of the index. If you have the ability, you can test your strategies out on historic values and try to fine-tune the technical indicators, although beyond a certain point you will find that you are adapting the values to specific historic events, rather than keeping the strategy generally effective.
One of the most important aspects of a trading plan is your stop loss position, and your money management. It is essential in any financial trading to ensure that you do not run out of capital, even if you have several bad bets in a row. Some people say that preserving your capital is a more important imperative than trying to make a profit, and that if you work to preserve your capital then your profit will come as a result of your trading plan.
So if you want to spread bet the Swedish 30 index, develop your plan and remember to start small to provide a further test of how sound it is before risking too much.
Spread Betting – Swedish 30 Index
The Swedish 30 Index is not as well known as the majors, but represents a strong economy dependent on the export market. The current futures based spread quotation is 1026.15 – 1027.65 with IG Index. If you think that the index is going up, you can place a buy bet at a price of 1027.65. If on the other hand you think the index is going down you might place a sell bet, and that would be at a price of 1026.15. In either case, when you close the bet it is at the other price, as that is how the spread betting company stays in business.
Say you placed a buy bet, also known as going long, for £12 per point. Perhaps you were right, and the index went up to a level of 1092.30 – 1093.80, and at that point you decided to collect your winnings. The bet would close at 1092.30, and you would calculate the difference in points to see how much you had won.
1092.30 less 1027.65 is 64.65 points. As you bet a total of £12 per point, you simply have to multiply it out to see that you have profited £775.80.
On the other hand, the index might have gone down after you placed your bet. Say that it went to 998.30 – 999.80, and you decided that you did not want to lose any more and closed the bet. You opened the bet at 1027.65, and the bet closed at 998.30, which means that the number of points you lost is 29.35. You bet a total of £12 per point, which means you lost £352.20. It is easy to see why you need to close a losing bet quickly.
Now let’s look at the other case, of placing a sell bet, or short bet. This means you think the index will go down. Say you placed a short bet for £14 per point at a price of 1026.15. Let’s assume that the index does go down, and you decide to close your bet and collect your winnings when the quote is 958.63 – 960.13. The bet closes at 960.13.
The difference in points is 1026.15-960.13, which is 66.02 points. For the stake of £14 per point, you have gained is £924.28.
Once again, the value of the index may have gone against your bet, in this case increasing, and you would decide to cut your losses before the index got much higher. Say you close your bet when the quote for the index reaches 1041.6 – 1043.1. Again, as this is a short bet it closes at the higher number, 1043.1. Working out your losses, 1043.1 less 1026.15 is 16.95 points. The amount of your bet was £14 per point. If you multiply that out you find that you have lost £237.30.
One of the secrets of spread trading successfully is that you hold onto your bet long enough to maximize your profit, but that once you see you have a losing bet you close it quickly, and cut your losses.