One of the most substantial tools in the trading world is news trading, which basically is the technique of trading economic news reports. The news on the economic world helps the traders in many ways as they involve a lot of market updates, mergers, announcements of different financial related events, policy changes etc.
The first vital thing to know is how to use news trading to your advantage. For successful trading in Forex, the trader technically analyses everything about the market and other financial aspects. But the other important thing involves checking the news releases frequently. Most of the traders wait for the visualization of information or financial data releases and then start their trading based on them.
News trading can be a very useful tool as it gives an overview of the market and the position of different currencies to the trader. But the success of the trade actually depends on how the trader responds after the relevant news is conveyed to him. Traders have to carefully analyze the changes in the market. Once a trader is ready to start his trade based on a financial event, they need to check which pair of currency will fluctuate enormously by this event. Usually any fluctuation in event or data release from a specific area affects the currency of that area the most.
There are basically eight major currencies that a trader can focus if he wants to practice news trading. These are USD, EUR, GBP, JPY, CHF, CAD, AUD and NZD. As we can see the available currencies are spread all over the world and there can be more than 15 derivatives that can emerge from these currencies. There is always some data to share which the traders can make use of. Different countries have different timings of vital news releases because of their varying time-zones.
To trade news, one has to know what is probable in that time period and what is most significant. For example, the inflation, interest rates, trade balance, different financial surveys etc. are important releases for a news trader.
There are different methods for trading news and they can be useful for the traders but there are a couple of risks involved as well. During an important news release, a lot of traders broaden the spread which can make the costs go up but it can hurt as well. One can get locked, meaning that their trade is possible but it won’t show on the board and you cannot make any changes then. Also slippage can occur at this time and it will throw you at a very different price from when you entered.
But before even talking about methods or strategies of trading news releases, one should know which news to base your trade in. Always look for the release which can move the world of Forex the most. Mostly major news releases come for the Unites States as it is the economic giant of the world so the trader should watch out for news releases from US first and try to trade using dollar.
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