This article looks at using a forex strategy that trades on forex news releases.
If you are a fundamental trader, your trades will be affected by forex news. Making use of a strategy that is based on forex news means that you have to keep up to date on all the news announcements and economic data releases that are made available.
High Impact News
News announcements and data releases that are related to the forex market are published on a daily basis. Some of this information will not be pertinent to your trades, but there may be releases that need your immediate attention. The ones most relevant to the forex market are the economic releases. This type of news release may affect the currency value of the relevant country and if you happen to be holding that currency, you need to determine the impact it will have on your trade. To keep abreast of the sheer number of news releases, you should keep a forex calendar which will act as a reminder for the forex news. The calendar will provide you with the times and dates of the news release most relevant to your trading.
The effect of a relevant piece of news does not take very long to impact the forex market. Once a release has been published, you should check the impact on the price movements of your open trades. The expectations of the market and whether the currency moved up or down will determine the impact the news has had. Once the immediate reaction to the news has passed, the movements in price normally settle down. The initial movement can be attributed to an immediate reaction to the news which is often regarded as sheer panic.
Ignore Forex News
You should ignore the forex news if the announcement has met the expectations of traders and professionals. During this neutral phase there is no need to make any adjustments to your trades. Many trading systems are inactive during this period and you should follow suit. Traders who enter trades in this neutral period are normally trading on an emotional level.
Advantages of Trading Forex News
Most of the forex trading strategies have their pros and cons. There are two main benefits to trading on forex news.
- There are opportunities to effectively devise a system for this strategy. Most newcomers to the trading market find it extremely difficult to decide when to trade. Since the market is active 24 hours per day, they do not know what time of the trading day they should be active. If you are a forex news trader, you will find that the news releases are normally issued at set times during the trading day. This will make it easier for you to determine the best times for you to trade. This is the ideal situation for part-time traders as they can work around their other commitments.
- This forex strategy appeals to newcomers as it is a longer term strategy that does not require constant market monitoring.
Before you start trading forex news, you should determine if it will be suitable for your temperament and trading style. You need the time to analyse the information that is provided during the news announcements.