Forex News Trading
Traders in the foreign exchange market can potentially make thousands of dollars based on the volatility and fluctuations in the currency market. To better and have a leading edge over other traders, some Forex traders and investors participate in news trading. The risks are very high, but potential benefits may be worth thousands of dollars and many traders and investors use this technique.
The technique of news trading is simple. It is currency trading immediately before or after important economic news announcement. After news announcements, there is a high possibility that market prices will change, either for better or worse, depending on the news. For example, if the U.S. Federal Reserve announced another increase in interest rates, many traders may invest in U.S. dollar as it is expected that its value will appreciate. The main advantage of news trading is potential for the currency of the country to make huge gains or losses in very little time. Within minutes of an economic announcement, the currency of the country can gain or lose one hundred points almost immediately. The potential of huge profits attracts foreign exchange traders and investors, there are various risks associated with news trading.
Like any investment, there is always a risk, as well as news trading in Forex market. Although the potential profits are huge, the losses are also large too. The dangers of news trading come from the fact that trade must be done quickly or else you are going to lose. If caught on the bad side of the trade, your money will be gone faster than you can blink an eye. You will lose money so fast that not even be time to manually close your trades, leaving you with nothing. Stop-loss orders are also potentially dangerous as there is a high probability of failure due to sudden price fluctuation.
Although some investors and traders may have luck trading news, there is little likelihood that it will make a profit. Even if you are an expert news trader, you should still be very, very cautious when participating in this practice. Successful trading news depends solely on how you get your news. News The most successful traders are those with the fastest news and those who are able to quickly place their trades immediately after the announcement is made. Even using other forms of news trading, such as placing orders above or below the market price is still a guessing game, and those market traders who base their trades on guesses, not a lot of money soon.
For many Forex traders and investors, their stores are dictated by technical indicators and price indices. Hours are spent exploring each indicator, taking every risk into account, and then decide based on what was studied. However, Forex news trader, none of this issue, and the only thing considered is the economic news release.
News trading is possible because the Forex market is always open, unlike many financial markets. In financial markets, securities trades in certain stocks are suspended when an important company announcement is made. These announcements are usually made after the market closed for the day. However, since the foreign exchange market is open 24 hours every economic announcement will have a direct impact on the currency of that country, and perhaps others as well. In Forex market, there are eight major currencies traded, and over seventeen derivatives to be traded as well. This means that on any given day, there will always be economic announcements from any of the major traded currencies. Major merchant currencies are as follows:
U.S. Dollar (USD)
Great British Pound (GBP)
Euro (EUR)
Japanese Yen (JPY)
Australian dollar (AUD)
Swiss franc (CHF)
Canadian dollar (CAD)
New Zealand dollar (NZD)
Because of the availability of each currency, currency pairs, and its derivatives, such as USD / JPY, EUR / USD, AUD / USD, and several others, each currency can be traded at any given time because these currencies are globally traded.
Any news Forex news trader or investor should have the latest up to the moment news release. Even if the news Announcements are just a few minutes old, it can have disastrous consequences for any merchant who has risked any sum of money. Most news dealers like to keep an eye eagle on all news concerning economic activities, but what is most important news dealing with interest rate changes, FOMC rate decision, retail sales figures, inflation indicators such as consumer price index (CPI ), producer price index (PPI), unemployment, industrial production log, boost business and consumer confidence and business sentiment surveys. The manufacturing sector surveys, the trade balance release details, and foreign purchases of U.S. Treasury bonds, can also be useful for news trader to make better decisions about when or when not to trade.
However, it should be remembered that these news announcements can move impacts a country's currency, and after the announcement, volatility of currency can greatly change. It is important to take advantage of news that creates movements in volatility, which will take several minutes or even hours. Trading foreign exchange market just on the news is difficult and sometimes dangerous practice. However, there are some indicators that can do the work of a news trader easier, such as breakout indicators (Bollinger Bands, breakout bar candlestick, bar or cost). Research has shown that news announcements can affect the value of the currency is quite serious and in some cases it can gain or lose anywhere from 33 pips to 124 pips, opening of an ideal trading opportunity sought by news traders. If news trader is able to act quickly enough, even the smallest news release may turn into a potential profit of thousands of dollars. However, it is important to remember the volatility of such listings, and though it seems endless profits, losses can occur too.
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