Thank you to Mr. Zahir from MTtrading.ph for providing this content, not originally written by DaxTrader.co.uk
As the research featured in the Journal of International Money & Finance discusses, a currency trader should take advantage of news releases; the foreign exchange market absorbs and reacts to minor and major current events for hours and sometimes even for days after the event. If you’re a currency trader and you’re yet to be familiar with the slingshot news-playing tactic, you should become familiar with its profit potential.
What Is the Slingshot News-Playing Tactic?
The slingshot news-playing tactic revolves around the idea that news can be impactful and cause mayhem. It follows that a currency trader should look at the forex market’s reaction during certain periods. In EST times, the list of scheduled releases includes: 8:30 to 10:00 (for USD), 18:50 to 23:30 (for JPY), and 2:45 to 4:00 (for EUR).
Additionally, the slingshot news-playing tactic is about your initial capitalization (i.e. entering a trade at the right time). If a strategy, regarding entry and exit positions, is already in place, all that’s needed is to monitor how volatility can work in your favour.
The Secret: Not All News Matters
The slingshot news-playing tactic can be profitable, but only if you pay attention to the releases that matter. Processing all news items every time news comes out can be time-consuming; some reports contain information that may be irrelevant to your trade. The list of the right things to watch out for includes: trade balance, unemployment rates, inflation rates, interest rate decisions, and industrial production.
Slippage & Some Concerns
Like most trading approaches, the slingshot news-playing tactic has a set of drawbacks. For one, slippage (i.e. due to high levels of volatility, price action reaches points that are far from expectations) could take place; as much as your preparations in reviewing current events go, the economic conditions will pull a big gun on you. For another, outdated news can cause problems; you need to be swift in establishing your positions based on the reports since their elements can vary quickly.
The Last Word
The slingshot news-playing tactic can be used by a currency trader to rake in a huge sum of money. You should remain aware of the facts that: (1) the activity in the forex market doesn’t move in a single direction and (2) despite significant news releases, can still turn out unpredictably. It takes practice to find your momentum with the strategy, but if you can analyze charts well, you may be in a good spot.