Economic Indicators and Short Term Financial Spread Betting
Economic indicators can be useful - even for short term spread betting
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Yes, financial spread betting is predominantly a short term trading tool. However, there are some important fundamentals that even short term spread betters must take note of.
The aim is not really to trade off these economic indicators. But if, for instance, you have done your analysis and it suggests that the Cable is poised to rise, you may want to look at the economic calendar just to confirm whether or not there is data coming out from the US which may have an impact on professional traders’ sentiment on the US dollar's during the trading session.
Financial Spread Betters Must Watch Out For These Economic Indicators and Data Releases
• Broad economic indicators: Non-farm payrolls, Unemployment, average work week and Hourly Earnings data
Collectively referred to as the ‘Employment Situation’ , these data sets take the pulse of the US labour market. The report is eagerly awaited by Wall Street every month and where the numbers are substantially different from analysts' expectations, the reactions can be dramatic. Sharp increases in market volatility are not uncommon on days when this report comes out.
• Consumer Sentiment Data
This data is based on a monthly survey of 500 households conducted by the University of Michigan. The respondents are asked questions regarding their financial conditions and attitudes about the wider economy. Since consumer spending accounts for over two-thirds of the economy, this data is viewed by Wall Street as a good indicator of future consumer spending. The astute spread better wants to be on the same side as the
market. Keeping an eye on this data can help you to do that.
• US Factory Orders
This data documents the dollar amount of new orders for goods: both nondurable and durable. Keeping an eye on Factory Orders helps investors to keep a finger on the pulse of the economy. Needless to say, it helps to be mindful of this when you are spread betting.
• US Jobless Claims
As you can probably guess, the jobless claims numbers show the number of people who have filed for unemployment insurance (in the US) for the first time. This data helps investors to assess the strength of the economy and is keenly watched by Wall Street and City analysts. Remember to check this before you place a spread bet.
• Interest rates Announcements: US FOMC and UK MPC
Interest rates affect the markets in various ways. They have a direct bearing on mortgage costs and thus consumers’ disposable income and consumer sentiment. They also reflect the borrowing costs for firms and determine the willingness to invest. Consequently, anyone interested in the market, whether from a long term view point or a short term financial spread betting perspective needs to be aware of this key fundamental variable.
In using fundamental economic data for financial spread betting, here are a number of important points that you, as a spread better, should focus on:
• Know the market expectation: whatever the news that is coming out may be, it is not the data that moves the market. It is all about expectations and how the fundamental data differs from market consensus.
• Yes, financial spread betting is mainly short term in nature, but you should try and align the odds in your favour by trading in line with the broad market consensus and pro traders’ reactions to important fundamental economic news, keenly-watched economic indicators and important data releases. This is the basis of spread betting in line with the prevailing market sentiment and market trend, and it is the primary way to ensure spread betting profits.
• Extending the point above, when the practical technical analysis tools that we discuss on this site are aligned with the fundamental economic indicators, then you have the odds stacked in your favour. This is when the pro spread better is able to place a bet with confidence.
The moral of this story is simple: try as much as possible to increase your odds of spread betting success on every single spread bet. You don’t have to choose between technical and fundamental economic indicators if you can combine the two to great effect. This is the only way to ensure consitent profits in financial spread betting.
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