With at least eight major currencies available for trading at most currency brokers and more than seventeen derivatives of them, there is always some piece of economic data slated for release that traders can use to inform the positions they take. Generally, no less than seven pieces of data are released daily from the eight major currencies or countries that are most closely followed. So for those who choose to trade news, there are plenty of opportunities.
Trading news is harder than it may sound. Not only is the reported consensus figure important, but so are the whisper number and the revisions. Also, some releases are more important than others; this can be measured in terms of both the significance of the country releasing the data and the importance of the release in relation to the other pieces of data being released at the same time.
With the forex markets pretty much covering most of the globe, the news or fundamental events that affect the short term and long term price movements are many. Almost every week there are key markets moving events that offer potential trading opportunities. News based trading offers some distinctive advantages compared to traditional technical analysis based trading. The biggest benefits of news trading are the ability for the trader to capture volatile price movements. The downside to the news trading approach however has to deal with spreads.
Trading the news is exciting. However, it is also risky due to the large moves that follow a news release and because of these moves you need to be well prepared ahead of time if you’re interested in trading around big news events. Whether you are trading a short-term or longer-term strategy, you need to know how news comes out in regards to expectations. If markets come out in line with expectations then you will approach the set up completely differently than if the release is completely outside of expectations.
Traders who follow fundamental data seriously are considered ‘specialists’ in their field. It is too much for a retail trader, to expect to compete on this level. Some forex traders try to over-simply fundamental data when watching the news calendars – but have very little chance of reacting quickly enough as the market will already be priced in before they even see the data. This is why some traders try to avoid trading around any kind of news release.