Methods To Make Use Of Forex News Trading As A Widely Used Trading Technique For Some Forex Investors Economic news releases often evoke strong movements in the currency market, providing lots of short-term trading opportunities for breakout traders.
Yet, not all news reports are tradable. Some of them may not have significant effect on the market while others do. So, before deciding on trading the forthcoming news, forex traders may want to find out if the news is worth trading or not. Traders can find the significance of the news by looking at the economic calendar's special features, such as, for example, taking note of all significant news in red.
There are generally two techniques in forex news trading. The first is by "guarding" the breakout channel. Traders simply set Buy and Sell limit orders on both sides of a price channel, so when the news comes out one of the orders will most likely be triggered. Although this manner is very simple, it also carries real risks of potentially hitting the two orders as the market is shaken by the news release. During such "double-hit" situations, traders will experience losses on one, or sometimes, even both trades.
The second approach to currency news trading is by actually analyzing the data. Traders can predict the most probable result of the news by browsing at such economic calendar fields as: "Forecast" and "Previous". Figures in those fields would give an idea about the expected data that is to come up.
Then, traders would watch the news report and pay attention to the actual numbers released. If the data come as a shock, meaning that they are not close to what was forecasted, then forex traders would consider opening a trading position concerning the situation. If the data carries a positive surprise, they would open a Long position. And if it is unfavorable, then they open a Sell position. This news trading necessitates more attention from traders, but is also more effective as it carries lesser risks.
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