News is what most traders expect when trading. Regardless of what kind of analysis they practice (fundamental or technical), the news release is an important event that no trader can ignore.
Why is news release so important and what is news?
Conventionally, the news is an important economic event, on which the financial policy of a particular country depends, which in turn significantly affects the value of the currency of a particular country. Such news includes reports from leading economists, meetings of important economic institutions, the results of board meetings of world banks, elections, as well as reports from industry leaders in leading manufacturing countries.
All of the above news includes macroeconomic indicators that every trader should consider when trading. According to the results of certain events, a report is issued, which can greatly influence (and sometimes may not affect) the market movement.
News can be both planned and unexpected. Experienced traders are strongly advised to ignore sudden news, as spontaneous trading is rarely effective.
What news is better to trade on Forex?
The best option is scheduled news, the schedule of which can be found on any economic calendar. These calendars indicate the dates and exact times of the release of very important macroeconomic events. The most important news is:
- Inflation data;
- Information on unemployment;
- Interest rate data;
- Information about GDP;
- Industrial growth reports.
Other news may carry weight, but not as much as the publication of the above data. However, if you only trade news, then other news may also be useful.
Unfortunately, one cannot predict exactly what the news will be. But for certain issues, there may be certain prerequisites. And, if you have enough information to predict the final report, you can place pending orders and just follow how your deposit is increasing.
Most of the time in Forex trading brokers simplify things for traders and they have a section that is allocated to the news. Thus traders are able to check them, which helps them greatly. However, some broker websites lack them and as soon as you learn how to compare forex brokers with each other it becomes easier to choose a proper one for trading.
The main task of a trader is to follow a new emerging trend, which may (or may not) appear in connection with the release of this or that news.
How do traders trade on the news correctly?
When you have decided what news to trade on Forex, look for the relevant news releases in special economic calendars. It is advisable to put informers with a sound signal so that you do not forget that there will be a news release soon and you will need to start trading. Traders also indicate the time zone, so that the calendar correctly displays the date of the news release. Most of the Forex news is published in Pacific Time.
Not every broker can guarantee a high-quality signal when trading news. There are strong delays, distortions, or simply no signal from the terminal. In these cases, it is best to choose a broker that traders speak well of and who provides, if not ideal, then a stable quote signal.
Some brokers offer a deposit insurance service for news trading. If a broker provides such a service – spare some money and use it. It can save your deposit from unforeseen situations, or incorrect trading.
Choose the right currency pair to trade. It is worth remembering that every news release from each country is directly tied to its national currency. Accordingly, if there is news about Canada, then the currency pair for trading should be USD/CAD (dollar against the Canadian dollar). Other currencies for trading are selected in the same way.
Despite the fact that the market reaction to news can be unpredictable, there are a number of factors that determine the dynamics that are interesting for traders after the news is released.
For example, there is news that the US unemployment rate is 5%, but the previous news was 7%. This means that the state of the US economy is improving, therefore, the dollar is getting stronger against the background of this news. From this, we conclude that it is necessary to make transactions of purchase/sale of currency in favor of the US dollar.
What traders do not do when trading the news?
- Place buy/sell orders in advance;
- Leave the platform unattended;
- Do not use Stop Loss and Take Profit limits;
- Use trading robots that are not intended for news trading.
- Do not use the services of deposit insurance.
These are the main points, which should not be done if you often trade on the news.
As mentioned earlier, for this it is important to choose the right broker who, first of all, is interested in the client’s earnings. Unreliable brokers often dislike traders who trade on the news. If these are dealing centers that pay traders not actually earned money, but their own, they can in every way impede full-fledged trading on the news.
- Actual disconnection of the platform from the feed. That is, during news, the terminal simply does not work – traders cannot perform operations and the dealing center does not have to pay anything.
- Slippage. This is the opening of a deal at a less favorable price, as stated by the trader in the trade order.
- Increasing the spread. The broker makes news trading more expensive for traders, while the signal quality does not decrease. A relatively honest method, practiced by both dealing centers and some brokers.
Trading systems that allow traders to trade on the news
There are a lot of both home-made trading programs and other versions that are specifically targeted so that a trader can safely and profitably trade on the news. Most of them are incomplete, they are characterized by a large number of structural miscalculations. Using such programs should be very careful. This applies more to those robots that are freely available and distributed directly by the traders themselves.
If we are talking about corporate boxed versions, then their work is more streamlined and often brings good profits to traders. But even such systems have a number of disadvantages that should not be overlooked.
- The price is too high. Sometimes such an investment does not fight back even after several months of trading.
- The quality of the support team varies from company to company.
- The algorithm can break at any time. Due to the dynamics and volatility of the market, even the most efficient and theoretically perfect mechanism can fail. And this is not a miscalculation by developers or a trader who uses robots. This is the specificity of the market and nothing can be done about it.