Correctly Utilizing the News To Trade
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You simply cannot bypass the influence news has on the forex market. If you do you are sure to disregard your technical analysis based system at one point but little will you know that your system is as innocent as you are as ignorant of the influence news has on the market. If you want to involve yourself in the forex market; you must know what affects it. There is only one answer to that. The news! No matter how good your trading system is, disregarding global news will make you baffled at some unexpected market moves. Why trade the News? Important news makes the market move because traders will react on release of the news. You will be better prepared if you are on the right side of the move. Cons of News trading. All strategies definitely have their fall backs and so does news trading. -Because the markets are so volatile after the release of important news, most brokers will likely increase their spreads and this can hurt your trading. -Slippage becomes probable during periods of important news releases. It occurs if you trigger an order and due to huge volatility you are filled in with a different price. Big market moves are subject to whipsaws. The market may usually dangle up and down before participants eventually decide on the best direction. It can lead to profits but it is difficult to implement. You need to have a ability in global economics and its impacts on the forex market. And this is simply NOT easy. News you should follow. Trading the news is difficult not only because you need to have an understanding of economics but because there are so many news releases per day and if you were to act on most of them you definitely will get confused. Below we look at the trade-worthy news reports. The US is the most important player in the market and you should follow for a start only news from the US -US inflation and central bank news are so important and play a big role in the forex market. Information such as wars, natural disasters move the market significantly but not as much as central bank information. Follow major stock market motions too. It is important to note that when trading the news you should trade only the liquid pairs as they are the pairs affected hugely and directly by Fundamental analysis. These pairs are but not limited to: EUR/USD, GBP/USD, USD/JPY, USD/CHF, USD/CAD, AUD/USD. As a conclusion take note of the following points: When you trade using directional bias, you have filed your orders in a particular direction where you expect the news will make the market move. It is always good to understand the underlying reasons why the market moves in a certain direction when news is released. When trading using non-directional bias you are not bothered about where the price will go but are always ready to follow the market.