The most interesting trading strategies forex news traders commonly use is trading on economic news releases. News and economic data are the main forces of market developments, but in a different way. Many new traders expect crucial economic happenings and news releases to be reflected on the price immediately, when that doesn’t occur they protest that trading news is impossible. It is possible, and extremely attractive in the long term, if one is willing to wait for the payback to arrive.
The Ways To Forex News Trading
Have a look at various types of data and try to categorize them according some basic laid down criteria. It has been explained how news releases determine market prices in the long term, especially the one with greater value impacting the market, short term news trading, and various data releases that are important. There are three ways of trading forex news.
Riding Both Sides of the Market
Many traders position themselves on either sides of the forex market before an important release using an enclosed position. They wait for a number to come out and then continue to trade out of the position. If the number is favorable, the forex trader takes the first profit of the first trade. It helps the trader to decrease losses by ensuring that the unprofitable portion of the position is rectified by the market’s reaction itself. If the number is not favorable the same strategy is followed and trading of the losing long position is done.
The impact of some news announcements has an immediate impact spread over a period of time, instead of a single day in which the markets discount them. The mechanisms set up by low interest rates, and full employment have consequences that are relevant to many sectors of the economy, and trading on a long term basis is possible. A trader using this strategy will build up his position slowly and add greater value to a low frequency release and will wait until everything is clear for trading.
The trader has to have clear idea weather the short term news and the type of news will be beneficial to the trade. News traders quest for at least a 50 percent wonder in the data for the release tradable. The new trader can use the early period of trading in correcting his money management skills. Short term news trading can be easy and attractive if a trader can reduce the losses and save profits.
Important Economic Data Releases Which Are Often Traded
GDP – This is an important numbers which traders use for trading.
Employment Numbers – The level of employment in a country indicates the overall strength in the economy, and numbers like the unemployment rate can move the market substantially.
Trade Balance – A country’s currency along with its current account data gets affected significantly by the Forex trade balance.
There are many more releases, and the trader can study each of them for creating his own strategy. The key point is to protect from emotional extremes, and make sure that you only open positions when really satisfied with the forex news data release, and are confident enough that the situation offers reasonable potential for profit.