When you trade the forex trading markets, you’ve got a choice to make: whether to trade it technically or fundamentally (or both simultaneously). News usually moves the forex markets and often causes the currencies to gap or move really fast. Choosing to trade through news means you are trading fundamentals because the news release has information which impacts underlying fundamental economics of the money.
There are many forex signals traders just focus on the news and not on the trend. They find the date and time of these critical news releases and simply open a trade just before or right on the time of the economic data release. The advantage of such a strategy is that you don’t need to be up all night or be in the trade in the long term. The profits come in quickly an you are able to exit straight away with a profit (or loss – given that you have a proper trading plan with stop losses in place). There are a few disadvantages to this strategy. One big disadvantage is when there are rumours in the forex markets during the week that lead the actual move to being fully priced before the actual news release. Another disadvantage is that if your dealer doesn’t have a sufficient guaranteed stop then you may be gapped out of your stop loss limit and find yourself out of more money than you put in as margin. Also some forex trading system dealers ask for additional margin for these volatile times
The basic strategy to trading news that move the forex market is finding out the exact time and date of these news releases, then finding out where you can find out the news release the second it comes out (through newswires, government websites or Bloomberg) and finally making a decision on which way the news would lead the markets: would the market be bullish or bearish from the forex news result? Remember, you can’t make money from a news release if the market has already fully priced the circumstance. On the other hand, if the market has fully priced in one circumstance, but in actual fact the news release was totally opposite, then the market would go absolutely crazy and you would see a massive move in the currency in that occurrence.
So what news releases or economic news releases actually move the forex markets? You’ll have to come back for that. There are a few regular economic figures that come out monthly or quarterly that have the power to influence currency prices world-wide: and we will be examining each one as to what they are and why they have such a powerful impact on the supply and demand of forex.
