News Trading |
One of the key aspects of trading currency pairs is news trading. This skill is extremely important both for a beginner who is learning the basics and for an experienced trader who wants to improve his skills and skills.
When building a daily trading strategy, it is necessary to pay special attention to the dates and times of news publication for the period in which trading will take place.
To be successful when trading on the news, you should:– Track at least the approximate moment of significant news release.
– Know how the market works when publishing news messages and how to profit from using these principles.
– Consider technical analysis data in the context of certain news reports.
You need to know what information is able to set the market in motion, and what has little effect on the movement of currency pairs. This is not difficult. Traders have long identified the most significant economic factors and macroeconomic indicators that have a significant impact on the dynamics of changes in exchange rates. We will give just a few of them.
Decision-making by central banks on the discount interest rate:
– Inflationary indicators.
– GDP (GNP) and industrial production index.
– Indicators of business activity.
– Speeches of persons holding key positions in the financial sector of states whose economics and politics have the greatest impact on exchange rate formation (USA, EU member states, Japan, Canada, Switzerland).
Unexpected news on Forex is the exception rather than the rule. More often than not, the news that will be published is already planned and to some extent “included” in the course. This is because the official news release is preceded by the publication of expert forecasts.
The market reaction to any news can be roughly divided into the following types:
– If the news corresponds to the expert forecasts, then the exchange rate of the state that publishes this news will not undergo significant changes.
– If analysts predicted the content of the news, but did not adequately assess the degree of its impact on the market, then the currency rate will continue to move within the formed trend, but volatility may increase significantly.
– In the event that the experts were wrong in their forecasts, the course will reverse.
Analyzing the influence of fundamental indicators of the economy on exchange rates, it is necessary to give priority to the direction of the trend.
If the news data contradicts the current trend, it should be borne in mind that the influence exerted by such news will be localized by the action in time within a few hours.
Otherwise, when the news is in line with the current trend, it should be expected to accelerate.
When preparing to trade on the news, do not forget that the maximum effect from the news release can be achieved only if the published data is combined with the data obtained on the basis of technical analysis.