Forex trading the news
How to trade Forex Fundamental News is a fundamental part of the analysis that every Forex trader must do before placing a position. There are several ways to operate based on the news and not all are efficient.
Many Forex traders like to trade Forex Fundamental News. Review the economic calendar of major economic data scheduled, as the famous payrolls, and are prepared to negotiate these currencies shortly before or after one of these key currency markets economic events. Of course, if something unexpected happens and are alert at the time, they might try to jump on that and take this opportunity. Normally different trading methods used to operate with the news. Let’s look at each one and analyze the advantages and disadvantages of each, before drawing a conclusion.
Predicting the outcome and Operating Before Publication
This might not be so naive as it sounds, depending on what you are predicting. For example, if you believe that, after an extensive analysis of the economic data and the history of the personalities involved, the Reserve Bank of Australia will almost certainly going to cut the interest rate tomorrow, while the market thinks this is an unlikely outcome, then you might have a good reason to open a short position in the Australian dollar, that is, sell it. Otherwise, I’d just like betting on a game of chance, with the odds against you even below 50%.
The advantage of taking an intelligent vision ahead of a key economic report is likely to get a very good price for their operation, without a high spread or slippage. The disadvantage is that probably will experience a period of high volatility in the minutes before the announcement that either will touch position or the stop-loss will force you to have a wider stop to make sure that their position will survive, which in turn limits their potential for risk – reward.
Operating Immediately Publication
This sounds logical: find out what the market expects and, at the moment he sees that expectations have been exceeded or missed greatly, place a position accordingly. This almost never succeeds, for several reasons: liquidity will be greatly reduced, there will be a huge slippage, the spread will be very high and your broker may well not even be able to give a price. Usually, when a retail trader can enter the market following the most important news of the market, the price is very poor. This may not matter if the event is a real game changer, as non-farm payrolls in the US, but it will work only sometimes.
This method of trading is always very poor.
Pending Orders Opening Before Publication
It might seem a good idea to wait for a very important economic news as non-farm payrolls in the US or the minutes of the FOMC meeting and the publication just before placing pending orders with your broker to buy maybe fifty pips ahead and sell maybe 50 pips below. Actually, it is a very bad idea, as liquidity is greatly reduced in the seconds before and after a major news media, which spreads the price and can not go anywhere. You can easily see that the two open and close operations in a second or two, a very unpleasant experience!
Even if it goes well, it is still very likely to suffer a major slippage in an activated position if the result is strong.
Wait for the market to digest News
This method of trading requires some discipline, intellectual and market analysis, but is really the only effective way to trade Forex Fundamental News. You should compare the result of the press release with market expectations and decide whether fundamentally changed market sentiment on the currency. Once you have made that decision, then you should wait a few minutes and see where the money goes.
His reasoning should then look like this: if the news of the market has changed a lot the picture to be much more optimistic and the price moves sharply higher, then wait for a setback and between long. If the news is very bullish, but can not change the fundamental picture – a much more common result – and the price is moving very alcistamente, wait for a setback and then place a reverse operation.
This method avoids the problems of slippage, poor liquidity, widening of spreads and poor execution of orders.
The Secret In Forex Trading the News
Here’s a little secret on how to trading Forex news: Most of the time, the news does not change the market movement: only accelerate. When you are linking this with the fact that the market tends to move in a price range most of the time – especially after a strong movement in one direction – you realize that most of the opportunities to trade forex with the news is actually negotiating with the initial movement, rather than waiting for track.