Significant economic data could have a significant impact on the currency market. When learning how to trade forex news, the majority of beginner traders look for just this movement, or volatility. The key news releases covered in this article along with their timing and the numerous news trading strategies.
Why You Must Trade Forex News
Traders lured to forex news trading for a variety of reasons, but volatility is the main driver. Simply put, news releases’ potential to affect currency markets attracts forex traders. Forex traders typically keep an eye on economic data releases that deemed to be of ‘high importance,’ such as GDP and inflation.
The good news is that you don’t need to have a PhD in Economics to make these kinds of moves because our economic calendar already provides economist expectations. The biggest moves typically occur after a “surprise” in the data, which occurs when the actual data diverges from what the market had anticipated.
Additionally, news releases scheduled for pre-established dates and hours, giving traders adequate time to develop a sound strategy.
Traders who can successfully control volatility risks at the scheduled time of the news release are well on their way to developing a reputation for being reliable traders.
How Can News Release Affect Forex Market
It is normal to see reduced trade volumes, less liquidity, and greater spreads right before a significant news announcement, which frequently causes significant price increases.
For the same reason that retail traders do not know the result of news events before they released, large liquidity providers try to reduce some of this risk by enlarging spreads.
Trading huge news releases may be exhilarating and perilous at the same time because of large price fluctuations. The absence of liquidity may cause traders to see unpredictable pricing. Such unpredictable pricing has the potential to result in slippage by causing a price explosion that breaks through a stop loss in an instant.
Additionally, if there isn’t enough free margin to account for the bigger spread, traders may receive a margin call. If these realities surrounding significant news releases not adequately controlled through cautious money management, such as implementing stop losses or guaranteed stop losses, it could lead to a short trading career.
Major currency pairs typically have lower spreads than minor currency pairs and the less popular emerging market currencies. Trading the majors, such as EUR/USD, USD/JPY, GBP/USD, AUD/USD, and USD/CAD, to name a few, may therefore be an option for traders.
Forex Spreads in General for Large and Emerging Markets
The best traders are those that well-prepared in advance and have a clear notion of the events they want to trade and when they will take place. A sound trading strategy should be in place as well.
Which Key Forex News Release Are Best For Trading
The important news events that have an impact on the forex market recognised by traders while learning how to trade news, and these events regularly followed utilising an economic calendar.
US economic data frequently seen as the most significant news due to its immense influence on the world’s currency markets. It is crucial to remember that not all news events cause volatility to rise. Instead, there are only a few significant news stories that have historically had the most market-moving potential.
The table below lists some of the most significant non-US data releases from around the world together with some of the main US economic announcements.
Resources For Trade News
Economic calendar: Be aware of the publication dates for important data, such as the US Non-Farm Payroll, GDP, ISM, PPI, and CPI figures.
Interest rate decisions made by the central bank can have a significant impact on the financial markets. Learn the times they are scheduled.
Real-time news feed: Receive updates from our top analysts to stay current on breaking news as it happens. Similarly, by subscribing to our market news, you can receive all of the day’s important stories as well as analysis.
How To Manage Risk During Trading Using Forex News
It is crucial to practise smart risk management during the erratic times that immediately follow a news release.
Although utilising stops is strongly advised in this situation, traders might wish to think about using guaranteed stops (where available) instead of standard stops. Verify the cost of guaranteed stops with your broker, but keep in mind that the amount of slippage that might happen during such turbulent moments frequently makes this charge small.
Additionally, investors should try to lower their typical trade size. Market volatility might be a trader’s best friend, but if not managed properly, it can dramatically diminish account equity. Therefore, traders can try to lower their trade sizes in addition to setting assured stops in order to control their trading emotions.
The Top Three Considerations for Trading News Releases
Planning is essential: Avoid being seduced into impulsively trading the news by the screen’s fast flashing bid and ask prices. Have the self-control to take a break, reflect, and come up with a plan that can be put into action in time for the following significant news release.
Spreads that are wider: It is entirely typical for spreads to widen during significant news releases. Make sure there is enough free margin to accommodate the temporary spread widening that will necessitate a larger margin.
Volatility is a crucial element to take into account while trading the news. The size of trades should be reduced, and stop distances should be large enough to account for expected volatility while still guarding against further losses.
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