Forex news can cause a lot of volatility in the foreign exchange market. Traders seek news of importance so that they are able to time their trade and make profits. The number of traders entering and exiting the market before a major news release increases substantially and this can cause big fluctuations in the market.
Although trading news is exciting, it can also be risky. If you want to start trading before the big economic news it is important that you are prepared for it. A key tool that you can use to prepare yourself is the economic calendar as it can help you become aware of the date when the news is to be released.
Tips for trading with forex news
Before you start using forex news to place a trade you need to understand that not all of them are important. If you want to achieve success you need to distinguish between important and unimportant news. If you are unable to make the distinction and try and place a trade after each news release you may not be able to achieve the desired success and may even end up losing money.
It is usually the expectations of the traders that make the markets fluctuate. If the economic news release is as expected then there might not be large movements of the market. However, if the news is not as expected you may see large price movements in the forex market.
Irrespective of whether you are trading long term or short term it is important that you are aware of the impact of the news on the foreign exchange market so that you are able to time your trade in an effective manner. You should avoid placing a trade after the impact or importance of the news has ended. If you try placing a trade after the news has lost its relevance you may not be able to benefit from it.
Major economic forex news used for trading
The major economic forex news that is used by traders to place a trade include interest rate, inflation rate, trade balance, gross domestic product, industrial production and employment numbers. It is usually the central bank or other government departments of Australia that release the economic news and numbers. As the data can impact the valuation of the currency it is closely followed by traders.
You should not just follow the economic news releases of Australia but other countries too. For example if you are trading AUD/USD you can follow the news of both Australia and the U.S and this can help you take important investment decisions.
Before you place a trade it is best to look at how the markets reacted earlier to such economic news and based on this analysis you can choose to trade. However, you also need to understand that the market may not choose to behave in the same manner as it did in the past. Look at the significance of the news before trading so that you are able to minimise risks and maximise profits.