Spread betting, particularly in the foreign exchange market, using the current affairs as the basis of the position is about relying on both social and political indicators in order to make a position. This is because some people think that these indicators have a great impact whether the values of the currencies will either go up or down. These indicators are those that are commonly being released on a cycle. Hence, they can be somehow predictable. However, there are also some economic or social aspects that may come to the market unannounced. In other words, they might just come into surprise. In this regard, there are few things that you need to know if you are planning to use this kind of strategy too. These are specifically about how is it being done, does the strategy suit you, as well as its pros and cons.
What is trading on current affairs and how is it done?
Firstly, trading on current affairs as a spread betting strategy in the foreign exchange market is usually being used by who people who do not possess the thorough understanding on the principles and technicality of the market. Hence, it is plainly making a position based on an announcement or a possible announcement. However, it is not just that. This is because you have to look into the triggers in order to make this worthwhile. Of course, you cannot just make a position after the announcement because it would already be too light. Timing is very vital here. You need to find out those factors that may lead to a social event, aside from those anticipated announcement. This could be the upgrading or downgrading of a country’s credit rating, which will surely have an effect to its currency value.
Is this for you?
If you have the interest on news, politics and social factors, then this could be a profitable spread betting strategy for you, most especially if you are a started in the world of foreign exchange market. Later on, you can further develop this to a stronger tactic that may provide you a more solid ground. For example, you can combine this to other technical trading strategies like momentum trading in order to make it even more effective. This is because momentum trading will introduce bases on numbers in order to make positions.
Pros and Cons
In terms of its advantages, it is fair enough for those who are just beginning to learn spread betting on foreign exchange. This is because it provides you a platform to take advantage on the most volatile point of the market. However, since it is a critical point, there is also a chance that you can lose money here too. It is in this light that you have to be committed in monitoring the news in order to have a sharper interpretation of the current affairs and its most probable effect to the market.