The movement of the prices in forex trading depends on news and economic releases. Trading according to the news is one of the widely used trading techniques. The question many ask is how to trade the news and is it easy.
First of all, I have to make it loud and clear that trading on news isn’t as easy as it may sound. You see major changes in price movements after some of the news releases and you start vigorously shake in anticipation of easy money. Well, I have to disappoint you – trading news releases requires a lot of skills.
Forex market is open 24 hours a day, and that is a huge plus for forex traders. Since world economic updates influence the price movements, forex traders are able to use this information to make decisions about their next trading order.
The basic idea behind trading news releases is to catch strong price movements (so called breakouts). The volatility happens a lot in forex market and every time it occurs there is a great chance of earning lots of pips. Your agenda is to catch the volatility momentum at the right time and use it as long as it lasts (the range is very fuzzy, actually. The volatility can last from minutes to days!)
The major currencies that you should keep an eye on are USD, EUR, JPY, GBP, CHF, CAD, AUD and NZD. If you are raising your eye brows, let me quickly answer your question. Yes, there are more currencies available, however these are the strongest currencies known today.
Now, the currency pairs which are important in news trading are:
I suggest using both news trading and technical analysis. That way you can use the breakout indicators as well as the news releases and have a higher probability to profit.
If you decide to become a news trader you will have to follow the economic releases very closely. The main topics that should be followed are the interest rate and FOMC rate decisions, retail sales figures, inflation indicators, unemployment data, industrial production, business, manufacturing surveys the country’s trade balance (US Treasuries). Not all news releases are important and even the important ones have different impact on forex market.
You can follow news releases via economic calendar. If you aren’t a big fan of technical analysis and chart indicators, you can consider going solo news trading. Actually a lot of forex traders choose this path. Their decisions are based only on daily news reports and updates and chart indicators are not used at all.