Forex news trading

Forex News Trading: How trading the news can be Profitable
The volatility of the Forex market is a double-
edged sword that can make anyone richer by
thousands of dollars or end up in bankruptcy.
As such, Forex trading has been considered by
some as a gamble. For many traders who want
to get the most out of the instability of the
market, they take advantage of a trading
practice called Forex news trading. This is a
risky business that offers potential gains but at
the same time, losses.

The idea behind Forex news trading is rather
simple. Trading is done right before or after
crucial economic news. After news is flashed
on headlines, there is a great possibility that
the market rates will fluctuate, either
positively or negatively, depending on the
news release numbers. For instance, an
announcement about an increase in the
interest rates of the US Federal Reserve will
cause inflation in the country’s currency, thus
traders will invest on the US dollar.

Forex News Trading: How trading the news can be Profitable (Courtesy of HenryLiuForex.com)


Traders consider this news crucial, as the fluctuation can bring in profit. It's important to note that
some news releases are more important than others, so not every announcement should be given
equal importance. For example an interest rate decision will have a dramatic effect on the
markets whereas trade balance or current account data, for example, will hardly move the
currency markets at all.
The high impact news releases are definitely worth paying attention to, even if you are a purely
technical trader. These announcements can create wild swings and sudden changes in volatility,
and can often render technical analysis completely useless during these times. The best thing to
do is to either trade the news releases, or wait a few minutes for the market to settle before re-
entering any positions. This is why many technical traders simply avoid trading during the new
releases.



For example, if an announcement is extremely positive for a particular currency, let's say the US
dollar, and then you may decide to immediately go short on the GBP/USD or go long on the
USD/JPY. Alternatively you could wait a few minutes, and see what your technical indicators say
before entering a position.
For some Forex traders, price indices and technical indicators are often used to back up their
decisions and trades when entering during new announcements. This requires much research,
computations, and analyses before a trade is made. Often, these analyses give a clearer picture
of the market’s trend.


Often times, high impact news releases can often lead
to large breakouts so this is something worth looking
out for. You will often find the price consolidates
around a certain level in the hours leading up to a big
announcement, so if a breakout occurs in the hours
immediately after an announcement, it could be a
good opportunity to get back in to go in the direction
of the breakout.

Sometimes a breakout will last a few minutes, other
times it will last hours or even days. It's sometimes
hard to tell how far a particular currency will break out,
but technical analysis can often be a useful guide as to
how far it can go. Forex news trading is certainly not
easy, and is definitely not for everyone, but if you only
have an hour or two every day in which you can trade
the markets, then trading the news could be your most
profitable option.


Forex news trading

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Forex news trading