How to Trade the News

Trading the news seems to be a popular topic for beginners. Do not be fooled, traders have lost a lot of money trading the news without the proper tactics. The simple fact that the forex market is essentially open 24 hours, 6 days a week can put you at risk even when you sleep. That is why trading the news requires you to be an active trader with a majority of the time watching your screen. To be sure, when done correctly, trading the news can be a very lucrative strategy but it certainly can take up a lot of time. Also, it is important to note that in some cases, the currency pair has already moved prior to the release of important data. This can happen because of “whisper numbers” which are essentially unofficial, unpublished forecasts that are reserved primarily for big banks and wealthy financiers. So, even if your analysis was right, the pair could have already seen the move that you were anticipating which puts you at considerable risk. However, if you decide that trading the news is right for you, you must arm yourself with the proper tools and knowledge to make money.

First and foremost, I want you to post this chart up where you trade and use it as a reference for pairs that you trade. This chart is a timetable in which reports are released in that given country. This will be a huge key because these timeslots are when you can expect reports and trades. While the chart does not list all available countries, these are the most popular in terms of forex trading.

Country

Currency

Time (EST)

U.S.

USD

8:30 – 10:00

Japan

JPY

18:50 – 23:30

Canada

CAD

7:00 – 8:30

U.K.

GBP

2:00 – 4:30

Italy

EUR

3:45 – 5:00

Germany

EUR

2:00 – 6:00

France

EUR

2:45 – 4:00

Switzerland

CHF

1:45 – 5:30

New Zealand

NZD

16:45 – 21:00

Australia

AUD

17:30 – 19:30

Next, you must know the most important reports that actually move the markets. Not all government data is created equal and certainly there are some reports that are much more important than others. The most important reports are: interest rates, retail sales, inflation data, industrial efficiency, unemployment, business and consumer sentiment, trade data and manufacturing data. These reports all are key to determine the health of an economy and they are the reports that actually get the markets moving.

Now that you have the important reports and times down, lets go through the process. Once you see a report that you want to trade coming out, open up a chart of the pair you want to trade. Next, check the chart to determine the underlying trend and how the pair is positioning right now. In a perfect world, the pair would be on the verge of a breakout with the report, in theory, pushing the pair to breakout. However, it is rarely this simple and there are issues that you need to worry about such as volatility. For instance, if the report goes against you, your losses could build up in no time as volatility usually spikes after reports are released.

The bottom line here is trading the news is not as simple as it seems. In fact, there are a lot of odds against you, which puts pressure on you to make sure the report will go in your favor. I urge you to use a paper account for several months before venturing out with your own money. Beginners should focus more on trend trading or fundamentals rather than trading the news.

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