Ways To Use Forex News Trading As A Widely Used Currency Trading System For Most Forex Investors
Economic news releases typically evoke volatile movements in the currency market, providing plenty of short-term trading opportunities for breakout traders.
However, not all news data releases are tradable. Some of them may not have significant effect on the forex market while others do. Thus, before deciding on trading the forthcoming news, market traders may want to find out whether the news is really worth trading or not. Traders can find the worthiness of the news by browsing at the economic calendar's special features, such as, for example, taking note of all essential news in red.
There are generally two ways in forex news trading. The first is by "guarding" the breakout range. Traders simply set Buy and Sell limit orders on both sides of a price range, so when the financial news comes out one of the orders will most likely be hit. Although this method is fairly simple, it also carries real risks of potentially hitting the 2 orders as the forex market is shaken by the news release. In such "double-hit" situations, traders will face losses on one, or in some instances, even both trades.
The second approach to currency news trading is by actually analyzing the info. Currency traders can predict the most probable result of the news by searching at such economic calendar fields as: "Forecast" and "Previous". Figures in those fields can provide an idea about the expected data that is to come up.
Then, traders would keep an eye on the news report and give attention to the actual numbers released. If the data come as a surprise, meaning that they are not close to what was forecasted, then traders would evaluate opening a trading position regarding the situation. If the news data carries a favorable surprise, they would open a Long position. And if it is unfavorable, then they open a Short position. This news trading requires more deliberation from traders, but is also more effective as it features lesser risks.
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