Many of the strategies used in trading take the approach of analyzing data such as price action and market patterns. Whether they’re based on technical or fundamental analysis, these methods are not excluded from one of the largest market influencers. None of these trading strategies can avoid the effects of big news events in relevant countries across the world. The forex market, which runs on a 24-hour clock, can be influenced by the news, whether it’s financial or otherwise, at any given time. Therefore, a trader needs to monitor news from the countries of their chosen currencies throughout each day to stay updated on potential changes and risks.
In the forex industry, this news could relate to Central Bank conferences, reports and news about economic data. When these releases hit, they directly influence the value of currencies and can largely impact the markets. Because forex trading involves two currencies, there are automatically two countries that should be monitored daily for any potential news releases.
Key economic factors
When news is released about any type of economic data exceeding its original expectations, the market conditions can either become better or worse. The following are the most influential market factors that can cause a positive influence by exceeding data values:
The two important factors that influence the market negatively when data expectations are exceeded are unemployment rates and unemployment claims. By recognizing these factors, traders can use this insight to their advantage and essentially implement the strategy of trading the news.
Trading the news: long-term
As with any trader looking for stock, commodity or CFD advice in long-term trading, a detailed strategy is required. This is no different for long-term forex trading. Because many news releases can take anywhere from days to months to affect the markets, both current and past data needs to be analyzed when trading the news. This provides an overview of how news has previously influenced the market and how similar news might influence the present conditions.
When trading the news for long-term goals, the data reviewed is based on long-term trends over several years. However, if the market is vulnerable to a certain event, one piece of news can have a long-term effect on market trends, such as a long-lasting downtrend.
Trading the news: short-term
Trading the news becomes more complicated when it comes to intraday releases. Within minutes before and after a release, the market becomes volatile with drastic price movements and tighter stops. Short-term trading of the news consists of several strategies. The first is selling spikes resulting from bad news. The time during the price jumps shortly before and after news is released is often the best moment to sell.
The second strategy is buying after spikes resulting from bad news if the history of the currency pair is good. Although the price might fall after the news, it is bound to bounce back and continue in its uptrend.
Another strategy is to place orders to buy above and sell below a break. This is effective during the period of uncertainty before news is released and is best done in a wide range apart from each other to avoid backlashes. The last strategy is to anticipate the news based on educated predictions. This is usually done with confidence in a trader’s experience and understanding, and it can be extremely beneficial if it is done correctly.
Trading the news is a forex strategy in itself, and it can produce substantial profits during volatile market conditions. This strategy is best implemented when combined with existing forex strategies to create a well-planned approach.