This article looks at trading on forex news and how to do this effectively.
The global economy is an important factor in all financial markets, but especially in the foreign exchange market. This is due to the impact it has on the market movements and the forex trader’s trading strategies. In order to keep up to date with economic forex news one must have time to do analysis, either time or forex calendars, as there are numerous amounts of daily releases.
While trading on foreign exchange news releases sounds like a simple strategy, it can be rather difficult. Not only must you keep abreast of the published information, but you must also be aware of all revised historical data. You must also have knowledge of the rumours in forex forums as some of these rumours may be ‘insider tips.’ The significance of economic news releases and the countries it affects can play a large role in the influence on the forex market.
Why are forex news releases important?
In order to trade the foreign exchange market effectively, you must be aware of the relevant releases at least one week in advance. It is also vital that you are aware of the data announcements to be published as these can also be influential to the market. Some of the most significant releases can include:
- Trade balance
- Consumer confidence surveys
- Retail sales
- Consumer price indices
- Producer price indices
- Interest rate adjustments
- Unemployment figures
- Industrial production, and
- Manufacturing surveys
What are the forex news publication times?
The times and dates of forex news publication are entirely dependent on the country affected. It is advised that you maintain a personal forex calendar in order to stay up to date with relevant forex news releases to your currency pairs.
What is the reaction time?
The length of time that the reaction to forex news can be felt varies. It can last for a few hours or a few days, dependent on the news and the currency pair influence. Generally, the effect of forex news releases is felt for approximately 1-2 days after release; however, the impact can be noted 5 or more days later.
What methods are available to trade forex news?
The most common method used to trade forex news is by finding the consolidation period before a large number and then using that number. This method can be done on either a short-term or daily basis. However, the volatility of the foreign exchange market will make it difficult to trade with this strategy.
In order to implement this strategy you must keep up to date with all global events that may affect your trading pattern. If you do not this strategy may become complicated and confusing, which can lead to detrimental losses. It is important to stay abreast of information as a news release can cause a sudden swing in the market. This swing can lead to changes in trading.
While one must stay up to date with news, it is important to determine which news releases are relevant to your trading. All news should be examined to determine whether they will affect your currency pair or not. You should also use look at both political and economic items as any movement in the country’s status can affect trading.
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