When trading forex, one of the most important items to watch at the beginning of each trading session is the news. Taking into account that forex is up and running somewhere around the world 24 hours-a-day five days-a-week, the international news reports can play an important role in prices.
Traders need to not only check the news reports of both of the pairs they are trading, but they must also take into account how events around the globe can send prices suddenly soaring or plummeting without prior warning. Whether it’s the newest financial reports or a local catastrophe, it can send the market in a direction you were not expecting.
Using News Releases
Depending on the currency pair you’re trading, there is a time schedule of when that country publishes its news releases. Of course, this does not take into account a natural calamity or sudden news event, but it does include the economic releases that you should view before placing a trade.
Besides knowing when the relevant releases will be expected, traders know how to pull out the data that is most important to trading. The economic releases usually include data covering retail sales, any new interest rate decisions, consumer and producer inflation rates, levels of industrial production, unemployment rates, business surveys, the trade balance, consumer confidence surveys and surveys published by the manufacturing sector. That can all be mind-boggling and time consuming, but not if you know how to pinpoint the data that will help you make the smartest trades.
Keep in mind that the important information and details you are looking at one week may not be relevant the next week. Watch the headlines and keep to the top of the market so you will know what to focus on.
It’s hard to say how long the economic news release will be relevant, but it could last from one or two days up to four days.
Watching the News
The real trick to trading the news is looking for a time of consolidation before the big number. Then place your trade during the back of the number. Do this either on a short-term trade or use it on a daily basis. The reason this can be so difficult is because of the volatility of the forex market.
Please bear in mind that even if you’re trading with the news and doing everything according to the book, there is no guarantee that you will win.
With everything done correctly, there is still no way to know if the market will have the momentum required to sustain and back up your move. One way to avoid this scenario is by trading forex spot options.
There are several popular exotic options you can go with, including the double one-touch option, the one-touch option and the double no-touch option. Each one has a different barrier level. You can learn more about options here.
As with any forex trading plan, keep abreast of the current economic news so you can make the best trades in any financial environment.