The benefits and drawbacks of using a forex news trading strategy
Forex traders use various types of trading strategies in order to make money on the foreign exchange market. One of the popular trading strategies among day traders is that of forex news trading. If you are considering using this strategy it is important you understand the various pros and cons of the strategy. Only when you have insight into both sides of the coin can you make an informed decision as to whether this is the trading strategy for you.
The benefits of the forex news trading strategy
There are numerous benefits for this strategy that you have to be aware of.
- Forex news is easy to get. In the past it was harder for the individual to get the news that related to the forex market. Now with the internet and forex calendars it is possible to get the news quite easily. The forex calendar will even tell you the impact the news should have on the market.
- You can proactively predict the market with this new strategy. While this is possible it should be noted that you need to have a certain level of experience in trading on the forex market and some skills. The risk of proactively trading is also greater than normal but the rewards and profits will also be much greater. By being the first to trade on a trend you will earn the most profits as you beat the others traders to the post.
- Out of all the forex trading strategies this is one of the easiest to understand. The forex market is affected by a number of factors. These factors will be reported in the news. This news will help you predict what the currency rate will do. Once you are able to predict the changes in the currency rate you can try and predict what will happen on the forex market. Of course you will need to consider the news for both currencies in your currency pair.
The drawbacks of the forex news trading strategy
To make an informed decision you must review both the disadvantages of a trading strategy as well as the advantages. Here are the negative aspects of the forex news trading strategy.
- There are a lot of news releases each day. Again if you are not using a forex calendar you may be overwhelmed by the number of news items you have to go through. Going through all of the news can be time consuming and this can make any trader highly anxious.
- If you do not look at the news in time you will miss out on lucrative trades. As you have to wait for the news to come out you will not be able to set trades in advance. This means that you could lose out if you get there too late.
- If you are not using a forex calendar then you will have issues determining what news is worth looking at and what is not. Even with the calendar and the importance ranking you may still make the mistake of not taking note of the right news. If you are not looking at the right news any predictions you make about the market will be incorrect.
Get a free Forex PDF PLUS:
- 14 Video Lessons
- Free One-on-One Training
- A 5000$ Training Account
- In-House Daily Analysis
- Get FULL ACCESS