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Should You Trade The News Releases?
Written by: PaxForex analytics dept - Wednesday, 24 January 2018 0 comments
News and economic data are the main drivers of market developments, but in a little different way than many traders think. Forex news releases trading is probably one of the most exciting forms of trading because it can produce instant profits and instant gratification. However, traders should know that potentially big profits always come hand in hand with bigger risks. Volatility spikes during these periods and prices may move in a disorderly fashion. If you don’t have a solid trading plan for a particular event, it is better not to engage in any trades at all.
In the fast-moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long-term success. Trading technical chart patterns can be extremely profitable but one must always be aware of the fundamental story which is ultimately driving the markets.
The reaction to a news is always uncertain. No one can say in advance how the market will react to a specific news release. The reason is simple; people do not trade the news itself, they trade the difference between their expectation and the actual release number. If the released coming
out varies from what was expected, a strong reaction is most likely. However, even at that point, it is impossible to say whether traders will jump into the market. Sometimes, the market reacts before a news is released, and come back to its original point afterward. The only way to know is to watch price action closely. You should always protect your money.
Professional and profitable trading is here almost impossible because price turns so suddenly that you cannot react fast enough to get out of a losing trade without losing a substantial amount of money. Or, on the other hand, you cannot get in soon enough into a profitable trade and you end up chasing price. Whenever you catch yourself chasing a move without a plan, then you have made a huge mistake – it’s the sign of an amateur trader.
Trading news announcements like non-farm payrolls can be dangerous, and anyone going into a news release without fear of how badly an account can be ravaged by volatility should probably avoid doing so and instead wait for quieter markets. But, to the trader who always protects their downside, adheres to strong money management, and protects their account by avoiding the number-one mistake forex traders make, news announcements can offer compelling opportunities for a lot of movement in a very short period of time.