Suitability of Using Spread Betting to 'Trade the News'

[WinnerMan]

Hi There

I've been reading about 'trade the news' forex strategies, to be specific 'spike', and 'retracement' strategies i.e. you wait for a major economic news release, such as as an unemployment report, and then trade the spike or subsequent retracement.

I'm pretty much a newbie and was wondering if a spread betting platform such as IG Index would be suitable for such news trading strategies (intra day trades, in which time is of the essence.)

I would be grateful if someone could enlighten me - thanks in advance!

 

[arabianights]

those strategies are fine... your problem is trading the specific release itself... no real chance of that.

The reason, of course, being the lack of liquidity in the underlying. Which is a pathetic excuse really as the spread betting companies fancy themselves market makers... but whatever...

 

[WinnerMan]

Hi ArabianNights

Thanks for the quick reponse. I don't fully understand however. Are you basically saying I should not attempt the 'trade the news' forex strategies on a spread betting account?

Thanks
Winnerman

 

[tomorton]

It can be done through SB, but for some events they may widen the bid/offer spread, their platforms can slow down (though to be fair that could possibly be down to unusually heavy usage) and they may even suspend new internet trades/orders and go 'Phone only' or even 'Market Closed' for the interim until things settle down.

Whatever you do, I would certainly recommend 1) you don't try to anticipate the market's reaction, wait for the reaction and draw your cue from that, and 2) if the trade is going wrong, be prepared to exit fast.

 

[arabianights]

Hi ArabianNights

Thanks for the quick reponse. I don't fully understand however. Are you basically saying I should not attempt the 'trade the news' forex strategies on a spread betting account?

Thanks
Winnerman

I'm saying don't trade the figure/news release itself... but trading the reaction afterwards ought to be fine.

 

[gle101]

Hi There

I've been reading about 'trade the news' forex strategies, to be specific 'spike', and 'retracement' strategies i.e. you wait for a major economic news release, such as as an unemployment report, and then trade the spike or subsequent retracement.

I'm pretty much a newbie and was wondering if a spread betting platform such as IG Index would be suitable for such news trading strategies (intra day trades, in which time is of the essence.)

I would be grateful if someone could enlighten me - thanks in advance!

The main problem with SB is the fixed spread causing problem for SB during news release time. There are a few SB with a variable spread, news trading might work better with them. I agree with some of the posters here, overall, news trading with SB is subject to greater risk, I would be concentrating on retracement in order to thread safe.

 

[tomorton]

Of course, when you look back at a SB firm's tick charts around a news event, what they show is the mid-price - the spread on this could have been 2pts or 20pts, their platform could even have been closed to trades at the time, but such periods are not logged on the tick chart.

There is a longer-term way to trade news. When a share's full year or interim results come out (usually 7:00am), enter in the direction of the results day's price move. Statistically, this is generally going to be profitable over the next 2 sessions, then there is usually a pull-back. Use the closing price of the day preceding results day as your stop-loss.

Enter as late as possible in the results day session to ensure you are seeing a real move and the direction is correct. Don't worry about the entry direction being with or against established trend, the basis for this has been made obsolete by the results. Some of these moves or reversals based on results day can be huge and your strategy might allow you an asymmetrical position management, i.e. a firm stop or trailing stop running the winners. On occasions I have also entered after only the first half hour of trading post-results and got out at lunch-time with double-digit % profits.

These trades can be more dramatic (but more risky and with wider spreads) with small caps.

Whatever you do, try to avoid taking a position before results are released, not worth the risk.

 

[WinnerMan]

Thanks all for the varied opinions. As I am pretty much a newbie, I think I'll put this plan to use spread betting for news events on hold, or perhaps look into opening an account with the likes of FXCM...

 

[Dubai]

There is software to get you in before the spike but I am 100% sure it wouldn't work on a SB platform.