Spread Trading is a particular trading technique based on the study of two or more related financial instruments. Trading opportunities are captured by monitoring the relative trend of the instruments and arise from the deviation of instrument trends. If you observes an anomalous divergence between the curves, and therefore an increase in the spread between the instruments, you can point or at the convergence, and therefore at the approach of the curves, or at the divergence and therefore at a further departure of the curves.
The technique provides for the opening of a position on an instrument and a opposite position on the other. Making Spread Trading therefore means opening up more positions on related financial instruments in order to have coverage against strong and unexpected movements. Image the case of a collapse releated to an unpredictable event. If you work in Spread Trading, you find a loss on an instrument, but on the other a gain that somehow covers the loss. This obviously does not work on a single instrument (in that case or you lose a lot or you earn a lot).
To make Spread Trading, you have to choose financial instruments appropriately and in particular you need that the financial instrument are correlated (just to have similar movements and that coverage that we was discussed before).
Under normal conditions, that is, in the absence of strong movements, Spread Trading exposes you to more instruments and the result will depend on the relative movements of the financial instruments.
The FA Spread Trading Panel application allows the analysis of the performance of two or more financial instruments, and allow you to appropriately open positions in Spread. In addition, there is a Graphic Manager who will manage and close the group of positions when the target is reached. All this through a practical and intuitive graphical interface.