Traders normally depend on news report release as they anticipate what’s likely to happen in the market because it’s the news that moves market. Trading news is good for traders who like seeing profits within a shortest period of time.
Traders believe that when news is released there is always a reaction in the market.
It is during this period that some will exit their trades or tighten their stops as others prepare to take advantage of the strong moves in the market.
Which news can I trade?
News release from the USA always affects the market since it has the largest forex market economy and most pairs depend on the US dollar. The US dollar being the world’s reserve currency, any change in its economy shakes the forex market and causes a lot of volatility.
You should always look at the news that contribute to the major financial economies in the forex market such as news release from USA, the Euro zone, Canada, Australia, UK , Switzerland, Japan, Germany and China.
Major news reports are interest rates, Non-Farm payrolls (NFP), FOMC, Consumer Price index (CPI), employment and unemployment rates, Gross Domestic Product (GDP), trade balances, crude oil inventories and Purchasing Manager Index (PMI).
Where can I find news data?
Major fundamental news is released every day of every month as scheduled on the economic calendar. It is usually scheduled monthly or quarterly and it is advisable to always check for any news that are likely to affect the market before you start your trading day.
The economic calendar can be easily accessed online as long as you have internet.
When you look at the economic calendar, you will realize that apart from the news category and the degree of volatility, it has provision for the previous data, forecasted data and the actual news data release .This provides a basis for comparisons to gauge the performance of the country’s economy before taking any position.
Forecasted: this is the figure determined by economist before the actual news is released by the source.
Actual figure: the real news released from the source at the date it was scheduled
Deviation: the difference between the actual release figure and the forecasted figure.
When the actual news is better than expected, we expect a rally in the currency in question upwards and when the actual news release is less than expected it still reacts to the market and rallies on downside
News can be traded in two different ways:
By placing a trade before the news release. That is within 10-20 minutes to the time of news.
Analyze the market before the news release comparing both the technical and market sentiment and see what they are trying to tell you at the moment.
Or you can trade news at least 5 min after the news release. Here you enter a position after the news is released. After you have done all the market analysis, you wait unto the news to be released only then you open a position.
Trading news is so challenging and it is the time when the market is very volatile. You are either in or out. When your predictions turn out to be wrong, you get kicked out immediately either with a small loss or a big drawdown on your account.
Spread is likely to be big as traders look for clear entry points to take positions and Slippages are likely to occur due to high volatility making delays in execution of some of the orders and sometimes closing with a bigger stop loss than expected.
Trade with caution and use stop loss to limit your loss in case your prediction goes wrong.
Take your time and understand how different economic fundamentals affect different country’s currencies before you jump into conclusions. It is very tricky to trade news but when mastered it is one of the surest ways to earn large profits within a short time.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...