Hello! I’ve noticed that many traders use technical indicators. How do these indicators matter when there’s important news? Do they still provide helpful signals, or should we focus more on the news itself?
You’re better off not trading during high impact news like NFP.
Indicators work based off of the predictive nature of the market and the release of news can make the market move in all kinds of directions and become extremely volatile making signals given indicators during this period basically useless.
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There’s a bit to unpack from your question.
- Price movements around economic news / data releases usually (but not always) have more to do with expected vs actuals and less to do with technical indicators.
- For short term / smaller time frame traders, news will have a much bigger impact than for longer term traders. Shorter term traders tend to either stay out or focus on the news. While the longer term traders will give more weight to indicators in their analysis, where major news releases could act more like inflection points or catalysts.
- Inexperienced traders tend to use their indicators to predict market movements and provide entry signals, which isn’t what they were designed for. The more experienced traders tend to use indicators as a tool to analyze market movements.
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Indicators?
No.
Price action?
Yes.
I mean…
From my experience indicators have no predictive power around news events.
I mean, let’s take an RSI for example…
An overbought level on a currency pair can get waay more overbought if a new release is bullish for that pair. Same with oversold levels.
Same with any technical indicator.
But price action…
That’s the market interpretation of a fundamental event.
So a pin bar after a news event?!
Yes, that’s an interesting one.
A bullish or bearish engulfing during a news event?
Also interesting.
In other words…
Indicators rarely matter during news events, but price action does.
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Agreed that Price action is great combined with good trend analysis.
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Technical indicators can still offer valuable insights, but during important news events, they may become less reliable due to increased volatility. It’s essential to consider both indicators and news. Use indicators for general trends, but stay alert to news impacts, as they can dramatically shift market sentiment and prices.
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Hi @zoeyfifteen, it is a good question.
There is no direct answer for you. It depends on instrument and characteristic of the indicator. There are 3 types of indicators:
- Equilibrium-based: MA, MACD, etc
- Momentum-based: Stochastic, CCI, etc
- Volatility-based: ATR, Std Dev, OBV, etc
Classification is based on their formula.
During news, the equilibrium-based indicators will still survive. But the indicator have to be properly set, parameters wise.
Momentum-based indicators can be useful, when you use them on higher TF.
The last one mostly are not reliable. News impact is too strong, they can’t follow.
For example, XAU. Using MA 50 on M15 was still respected during news. But when you use stochastic, during news, it’s better to monitor it from H1 and above. Finally, ATR during news, it has no clues about what is going on. 
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Big players enter before the news not during , so technical indicator before news is fine
Good question, but you have to understand that technical indicators can become less reliable because the market reacts quickly to the event, making them unpredictable. It is better to focus on the news and how the market responds in the moment. After things calm down, technical indicators become useful again.
It’s best not to rely on indicators. The market becomes too volatile, and signals often get distorted during high-impact news. It’s wiser to focus on the news itself and wait for the market to settle before using indicators again.
Technical indicators can be useful, but they often get disrupted during major news events. I always check the news alongside my indicators to stay aware of potential volatility. It’s about balancing both for better trading decisions!
I’m not convinced that technical indicators are very important at any time, let alone when there is important news.
Indicators have to be used carefully. We need to find how to configure an indicator to match market structure. Indicator will only help us to analyze faster.
Example bellow:
EURUSD reacts nicely to one of the MA. We can see how the MA is located around SnR. If an indicator has been set properly, most price movement seems to respect the indicator.
It’s not the indicator that control market, but we set the indicator to follow market.
Look at the Blue and Red lines. They both showing latest SnR.
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Technical indicators can provide valuable insights into market trends and momentum, but their reliability may diminish during major news events. While they offer signals based on historical data, fundamental news can lead to volatility that overshadows technical analysis. It’s essential to balance both approaches for a comprehensive trading strategy.
Technical indicators can still provide valuable insights even during significant news events, but their reliability may diminish. News can cause sudden volatility, impacting price movements unpredictably. It’s essential to consider both indicators and news context, using them together to make informed decisions while being cautious of potential market shifts.
Thank you for your advice! As a newbie, I’ll keep this in mind as I work on my trading strategy. Thanks again!
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Thank you for breaking this down! I appreciate the explanation about using indicators as tools rather than just for predictions. This helps me understand how to approach trading better.
Thank you for your reply! I’m still learning about candlestick patterns, and I’ll definitely take note of what you said.
Yeah, thank you. I think it’s better to avoid trading during important news events as a newbie.