Just like the technicals define the market direction, the news events make markets move. News can affect the way you perceive things or make decisions. Traders normally depend on news events report release as they anticipate what’s likely to happen in the market because it’s the news that moves market.
Market price moves strongly up and down as it tries to find stablilty due to high volatility caused by the news. At this point some traders panic to close their positions as others rush to make money within a shortest time possible. The news speed up reaction in the market by making prices move very fast
Why trade news.
At the release of important news, traders always expect big movements in the markets. This is the time you just warm up to make extra dollars in a shortest time possible.
During the news release , there is alot of anxiety by most traders in the market waiting for how big the news is likely to move the market. Price moves up and down making strong moves and everyone is looking forward on how to make more money without blowing their accounts. News really does move the market. It quickens up price movement so fast just like a catalyst.
During this time spread is likely to be big and traders are looking for clear entry points to take positions and slippages are likely to occur due to high volatility making delayals in execution of some of the orders. So as you look forward to trading news, you have to be more extra careful because trading news is like sitting on a double edged sword. The same way it can make you money is the same way you can lose it. It is a common thing that has made traders blow their accounts in a just a single trade in a few minutes. This is because when it comes to news it is so tempting that you get more greedy and forget the rules of your trading plan. When the trade goes a gainst you , fear raises in you and with an attempt to try recovering your loss by taking the opposite side of the trade is when the market reverses again taking the opposite direction and sweeps you off your feet. You will only realize that when you receive a margin call that your account balance is insufficient. You know that can give you a heart attack.
We are not trying to scare you but when it comes to trading news you are either in or out. As you plan to achiev a million dollar, think a bout it again. Develop a strategy for trading news so that you are able to know when to cut your losses incase the market goes against you. Just keep your discipline whether news or no news and trade following your rules. Now that you are here we shall take you through some of the news data release that are worth giving your attention and how to trade them.
Which news should I trade for forex
Not all news are worth to trade, some just cause noise in the market swinging up and down for just like 3-10 min and then things become normal again. On the other hand, at the release of very important events like a country’s interest rate, un employment rates, the market makes a very big movement in relation to the effect of the news.
News release from the USA always affect the market since it has the largest forex market economy and most pairs depend on the US dollar. The US dollar being the worlds reserve currency, any change in its economy shakes the forex market and causes alot of volatility.
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).
Below is a table showing some of the common news release that affect the forex market and the level of volatility.
The most volatile news are indicated with the three stars , moderate volatile with two stars and the less volatile with one star.
The most volatile news is likely to last for long in the market and can lead to a trend reversal, the moderate volatile news hold it for a while and may be can lead to a retracement. They are likely to last for an hour and then the market gets back to its main trend.
When the less volatile news is released, its like there is no news in the market. It makes no changes at all.
Some of the other news that need to be attended to incase they are up are the political and geographical news such as political unrest, change in government regime, elections, war and natural calamities.
These rarely happen so they are seasonal. But when released may cause a great deal to the economy and the forex market too. The related importance of these news release may change depending on the current state of the economy.
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...