How to Trading on News Release?

How to Trading on News Release

One of the great advantages of trading currencies is that the Forex market is open 24 hours a day. Disclosure of economic facts tends to be one of the most important catalysts for short-term movements in any market, and this is particularly evident in the foreign exchange market, which responds not only to economic news in the United States, but also to surrounding news. of the world.

With at least eight of the biggest currencies (also called the majors) available to trade on most Forex brokers and over 17 pairs of them, there will always be some economic disclosure traders can use in their analysis to make decisions.

Generally, no less than seven reports/pronouncements in the eight strongest currencies are released daily.

So, for those who want to trade on the news release, there are many opportunities. Here we will be looking at when economic news is released, which ones are most relevant to the Forex trader, and how traders should act in the face of this news-driven market.

Which Currencies Should I Focus on?

The coins below are the eight majors.

1. US Dollar (USD)
2. Euro (EUR)
3. Pound Sterling (GBP)
4. Japanese Yen (JPY)
5. Swiss Franc (CHF)
6. Canadian Dollar (CAD)
7. Australian Dollar (AUD)
8. New Zealand Dollar (NZD)

Here is just an example of the most liquid pairs, based on the above currencies:

1. EUR/USD
2. USD/JPY
3. AUD/USD
4. GBP/JPY
5. EUR/CHF
6. CHF/JPY

As you can see from this list, the currencies that we can easily trade cover the entire globe. This means that you can hand-pick the currencies and economics that you should pay particular attention to. But, as a general rule, since the US Dollar (USD) is on the “other side” of 90% of all transactions Forex , US economic data tends to have the greatest impact on the market.

Operating economic disclosures is more difficult than it sounds. Not only (prior) consensus release is important, but also rumors and revisions, in addition, some releases are more important than others, this can be measured in the significance of the country spreading the news and the importance of breaking the news in relation to other news being released simultaneously!

When is News Released?

The image below lists the approximate times when the most important news releases in each country are published. These are also times when you should pay more attention to the markets if you plan to trade news releases.

How to Trading on News Release

Economic Calendar

 

What are the Key Disclosures?

When trading news, the trader has to know first what news will be released that day. There are several ways to do this, the most practical is using the economic calendar. Second, the key for you is knowing what information is important.

Generally speaking, these are the most important economic disclosures for each country:

1. Decision on interest rate
2. Retail sales
3. Inflation (Consumer and producer price index)
4. Unemployment
5. Industrial Production
6. Business Sentiment Survey
7. Consumer Sentiment Survey
8. Trade Balance
9. Research in the Industry sector

Depending on the current state of the economy, the importance of these disclosures could change. For example, – unemployment may be more important this month than the trade balance or interest rate decision. Therefore, it is important to always stay on top of what the market is focusing on at the moment.

How Long Does the Effect Last?

According to a study by Martin DD Evans and Richard K. Lyons published in the Journal of International Money and Finance (2004), the market may still be absorbing or reacting to news for hours, if not days, after it has been published.

The Study shows that the payback effect usually occurs on the first or second day, but the impact does not seem to last until the fourth day. On the other hand, the impact of the order flow is still very pronounced on the third day and still felt on the fourth day.

How Should I Operate News Then?

The most common way to trade news is to always watch periods of consolidation on the eve of a major report and only trade the breakout. This can be done in short term and intraday.
 

We mentioned earlier that trading news is harder than you might think. Why? The main reason for this is volatility. You can make the right move, place your position correctly, but you will end up getting a stop-loss, or the market just doesn't have the momentum to sustain the move.

How to Avoid Being Hit by Volatility When I Operate News?

The answer to this question can create controversy, as it is quite difficult to analyze the news, to know what the market expects from it, to know if the news has not already been discounted in “rumors” previously.

So, be on the lookout for big opportunities and try to observe when the market is heavily saturated on the verge of a major market impact news release.

Your chances of getting it right will be higher, but it also doesn't eliminate the risk of the market reversing, you being stopped by a spike (big rapid oscillation in the market), or you enter on the wrong side of the market. Whatever your trading style, never forget stop-loss.

Conclusion

As we saw in this article, the Forex market is particularly adhered to short-term movements, brought about by the release of economic news by USA and for the rest of the world.

If you want to successfully trade the news on the Forex market, the considerations you should keep in mind are, when news is announced, which news is most important, and of course, how to trade Forex based on it. Do your research and always keep up to date, your reward could be great.

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