I was checking up some trading news and I noticed that they recently started posting news related to different markets, for instance, the recent Argentinian crisis and the crash of the Peso.
I thought it was a really interesting way of keeping in touch with recent events in short blocks but that let me wondering something: Since I only trade the FX majors, I’m not sure such news is relevant to my trades. Do you guys think that world news relates to major pairs even when they are not directly connected? Should I keep an eye on global events as well as indexes?
News definitely effects all currency pairs as if say one currency pair drops it will bring down others or cause institutions to rebalance currency exposure.
I can give you an example when the Turkish lira fell because of a Trump skirmish so did other EM currencys as investors feared contagion - investors will leave fund if they think it is too risky or illiquid. So JPY would of headed higher in this scenario and so would a French franc if it existed as Turkish borrowed alot from French banks so if thier currency drops loan payments increase!!
We do not live in a static world… You need a mix of fundamentals and technicals as the world is connected. Some days technicals will lead, some days fundamentals will lead
There are 8 important currencies - AUD, CAD, CHF, EUR, GBP, JPY, NZD and USD.
Some events are closely linked to some currencies:-
Some of them move together most of the time, like NZD with AUD, and CHF with EUR. But not always perfectly. New Zealand’s economy is smaller than their major trading partner, Australia, while Switzerland has a similar relationship to the Euro-zone.
When China’s economy slows down, AUD tends to fall (as Australia is a heavy exporter to China), therefore so does NZD. When Germany’s economy slows down, the EUR tends to fall (as Germany is the largest economy in the Euro-zone, therefore so does CHF.
When oil prices fall, CAD tends to fall, as Canada is such a major oil extractor and exporter.
But sometimes a move towards risk aversion can trump all the good news out there. A reduction in risk tolerance tends to drive capital from speculative currencies towards safe haven currencies - so, away from AUD, NZD and CAD (and possibly even USD in serious cases), and towards CHF and JPY (and possibly USD if things are not looking too bad for the US). If risk aversion is driving banks to sell AUD in order to buy JPY because of some issue half the globe away from Australia, then almost no Australian good economic news will stop that trend.
Track the news which is relevant to your strategy. Make an effort to not fill up your consciousness with news or information which is irrelevant to your decisions. This is not a contest to see who knows most.
I agree with tommor as well. Keep an eye on truly important events that you know will happen - such as the Brexit referendum - but beyond that mostly pay attention to fundamentals that affect your trading directly.
@QuadPip@mlawson71 I half agree with @tommor because the world is connected so a good trader can see how an irrelevant piece of news on the other side of the world/market can effrect the asset he is trading.
Let me give you an example, a little while ago Rolls Royce had to recall engines to fix a problem on a certain plane.
a good trader would short the airline that flies that model of plane, let’s say Ryan Air…A great trader would go one connection deeper and analyze what route does that certain model of plane fly for Ryan Air…If it is Spain then this trader would short hotel operators ion the area etc…
So you can’t sit around reading trade publications etc as the world is too interconnected.
I was a fanatic for time management techniques when I was employed.
A good exercise is to give yourself strictly 2 minutes on each chart to make the trade decision. So the decision on some is Buy, on some its Sell and on some its Wait. Make a note of these but do nothing else yet. Then give yourself another 5 minutes to review each chart and see how often the decision changes. If it changes more often than not, extend your initial TA time to 3 minutes but always keep your review time at 5 minutes each and see now how often it changes. If it still changes more often than not, extend your initial TA time to 4 minutes etc. Of course, also keep track of your wins/losses.
This is exactly what I’m working on now. I’m given to analysis paralysis. And eventually I talk myself out of a potential trade. Ive missed many excellent trades due to this. I’m also a perfectionist and I suffer from OCD. While I’m committed to conquering these and there has been considerable improvements on all fronts, I fight these demons every day, one day at a time.
Another useful technique that 100% always successfully limits your decision time to 5 minutes, is to wait until you only have 5 minutes left. (Use cautiously)
