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Forex: trading on the news
Written by: PaxForex analytics dept - Thursday, 07 February 2019 0 comments
One of the key components of understanding the movement of currency pairs in Forex is to work on the news. The ability to work on the news is very important both for the novice trader and for the experienced trader, who seeks to increase his own professionalism.
Every day, drawing up a trading strategy, the trader should analyze the news calendar for the planned trading period.
In order for trading in the Forex market based on outgoing news to be successful, you should:
- to know the approximate time period when you can expect the release of strong news;
- understand how the market functions when the news comes out and how you can get income while working in the market;
- combine news and technical analysis.
You need to understand which information more dynamically affects the market and which does not. It is quite simple. Trade practice, which has been developing for many years, indicates that a number of economic conditions have already formed, which have a significant impact on the movement of exchange rates.
Here are just some of them:
• Central bank interest rate decisions.
• Inflation rate.
• GDP and industrial production.
• Business activity indices.
• Speeches of officials of this or that country (to a greater extent are influenced by speeches of high-ranking officials of the USA, Japan, Switzerland, Canada, and also of the states of the European Union).
Quite rarely unexpected news comes out on the Forex market. As a rule, all news entering the
market is planned. The foreign exchange market expects the release of this news and in every possible way seeks to prepare for it. Before the news comes out officially, experts publish their predictions about the possible behavior of exchange rates.
The possible market reaction to the news coming out may look like this:
• In the event that the news meets expectations, then the exchange rate of one or another currency will not change significantly.
• If Forex analysts gave a correct forecast, but the market effects were not fully evaluated, then the currency rate will continue to move in the prescribed direction, however, an increase in the exchange rates movement may be observed.
• If Forex experts made wrong predictions, the exchange rate will change its direction and start moving in the opposite direction.
Analyzing how fundamental data affects exchange rates, it is imperative to take into account the direction of the trend. If the released news contradicts the trend, it means that the impact of this kind of news will not be long and will last only a few hours. If the released news fully coincides with the dominant trend, then this suggests that the trend will accelerate.
When the news of the Forex market come out, you need to remember that by applying the fundamentals of analysis, you can get the maximum benefit only if this information is combined with technical analysis data.