WHY TRADE THE NEWS ON FOREX
Forex news trading is attractive to traders for many reasons, but the most important reason is volatility. Forex traders are attracted to news releases because they can move the forex markets. Forex traders are drawn to news releases, such as inflation and GDP.
The largest moves tend to follow a ‘surprise’ in the data – where the actual data contrasts what was expected by the market – the good news here is that you don’t have to hold a PhD in Economics because our economic calendar already provides economist expectations.
News releases are also scheduled at predetermined times and dates, giving traders ample time to plan a solid strategy.
Traders who can manage volatility effectively at the time of the news release are well on their path to being consistent traders.
MAJOR NEWS RELEASES IMPACT ON THE FOREX MARK
It is not uncommon to see lower trading volumes, lower liquidity, and larger spreads just before major news releases. This can often lead to big price jumps. Large liquidity providers, just like retail traders, don’t know what the outcome of news events will be and so they try to mitigate some of that risk by increasing spreads.
Trading major news releases can be exciting due to large price movements, but it can also pose a risk. Trading could be affected by erratic pricing due to a lack of liquidity. This erratic pricing could cause huge price spikes that can quickly surpass a stop loss, leading to slippage.
If there isn’t enough margin, traders could be placed on margin call. If not managed well, these news releases can lead to a short trading career.
In general, major currency pairs will have lower spreads than the less traded emerging market currencies and minor currency pairs. Trades may be made in major currency pairs such as EUR/USD or USD/JPY, USD/CAD, GBP/USD or AUD/USD to name a few.
Traders must be prepared for any potential trades. They should have a clear understanding of the events they are looking to trade and when. It’s also important to have a solid trading plan in place.
“Don’t worry about what the market will do. You have no control over it. If it does get there, think about what you will do. You should not spend too much time thinking about the rosy market scenarios that you like. In those cases, there is nothing else you can do. Instead, focus on the things that you don’t want to happen and what your response will. – William Eckhardt
WHAT MAJOR FOREX NEWS OFFERS TO TRADE?
When learning how to trade news, traders must be aware of the major news events that affect the forex market, that can be monitored closely using an economic calendar.
Global currency markets consider US economic data to be the most important news. Not all news releases can lead to volatility. There are only a few major news releases that can move the market.
Below is a table that summarizes major US economic releases and some of the most important non US data releases from around world.
