Being new to FX I hear this a lot and it always makes me wonder, ok I wont trade the news, but then I ask myself, FX is 24 hours and the news is 24 hours, so when can I trade? In general I assume that no trading the news must mean not to trade around the time of BIG news eg. 8.30 am New York Finance News etc? :15:
Or do I have the wrong idea? Im a bit lost :16:
what is meant by that is donât try to anticipate the markets reaction to big events, i can tell you from personal experience that the market often does exactly the opposite of what youâd think it SHOULD do. in fact, i donât really take into account the news at all, but then i am a technical trader.
Ahhhh I see, thanks for explaining this! The markets reaction to the news! Would most of the news be already factored into the prices by the time we traders see it on our charts?
News is the driving force of the Forex market. News, as it affects a currency [pair] is constant: good, bad, neutral. You cannot avoid it, and shouldnât try to. When you hear a statement such as, âdonât trade the newsâ, the underlying message typically is something along the lines of donât try and predict how news will affect the Forex market - more specifically, a currency pair - and make your trading decision based solely on this.
If, for example, youâre expecting a news release to cause a particular currency to strengthen, you may be bullish on that currency. Once the news comes out, in accordance with your expectations, you begin buying up the currency only to find a short-lived spiked followed by a huge drop. Or, you may not even see a spike at all, just a drop. Or, you may see a drop, followed by a large spike. How does one reconcile all this? You simply canât, and will go mad trying to rationalize what happened. Many times, expectations are already priced in and the release of the actual news may prompt immediate profit taking - look into the saying: âBuy the rumor, sell the news.â Other times, news may surprise, and something else will unfold. But for how long will this be sustained? When will it reverse? Compared to the market movers, we as retail traders are small fish. We donât know, and our goal shouldnât be to try and understand why news affects a currency pair the way it does.
Now, thatâs not to say you canât use news to help in realizing your profits. News is what fuels trades. You can use this to your advantage by setting your sights on high probability technical setups that, when unfold, go the distance with news as its impetus.
At the onset of my adventures in Forex, I checked every news release on the currency pair I traded. It drove me crazy, and I didnât know when or how to trade as I couldnât understand why news affected the pair the way it did. I have since come to the realization, aided in part by many on this forum, that itâs not important to simply trade based on a news release. Rather, be on the winning side of a move that has the potential to yield decent profits using news as a catalyst.
So, donât be afraid to trade around a news release. Just put the necessary time into your technical analysis and youâll see what I mean. However, be wary about trading during speeches and the NFP (I donât trade around these two events and many strongly agree to avoid them).
Hope this helps, good luck.
SladhaFX Thank you so much for a detailed summary and your experiences with the news! I have also been following each news snippet and think I suffered the same âinformation overloadâ you describe. :30:
You mentioned the NFP and that brought back a nightmare I had around 2 weeks back on a friday afternoon!
This makes me wonder⌠I will research when the NFP are scehduled for. Along with currency fixings, currency options expiry times, etc! Lots of different factors I never realised mattered! :19:
Thank you SladhaFX for your [B]great advice[/B] and tips, I will take these events on board and try my best to avoid these times!:45:
What i do is read all the most significant reports and try to do and overall prediction of it, trading one by one just wonât do.
News drives the Fx market, though the market is a speculative one, itâs guessing how each currency will react to the news that drives the rates up or down. So, you need to pay attention to the important news, finance reports, bank notes, Fed meetings, etc.
But figuring out how the currency is going to react to the news is totally something different. So yes, it makes sense to analyze the news, work in the tech analysis to back it up.
Thanks for your comments guys! I will study the important news and view how the market reacts, keeping an eye on the larger financial events etc. :51:
How come some big news only affects the currency for a few minutes or hours? I donât understand lol. Is it that easy to fix the bad news? This forex looks so easy but sooo hard to understand lol.
Youâre welcome, glad to have been of some help!
I think most traders wander the same thing here. My answer is simple and only my opinion so take it for that and not trading advise. Most new releases are not as big as people think. Take US NFP for example. Last month NFP was in the toilet this month its still going to be in the toilet. Sure might show an improvement (like I think it did last month) but that dont make it good. It will sometimes cause a knee jerk reaction to it but after a few hours (generally I dont see it even last that long) it back to business as usual. Reason for this is really common sense when it comes to trading. When a spike like this happens if you are not in when it first happens you missed it. The worst thing a trader can do at this point is be a band wagon jumper and get in because price is skyrocketing. Why? Well you dont want to be the guy that buys in a jump in price and be stuck. See to get back out someone has to buy this trade and if there is no one left to buy it your screwed. So when price spikes and you miss it you can only do 2 things either wait till the dust settles and go from there or take the other side of the spike. I love to trade the other side of spikes but dont recommend it unless you know what you are looking for and how to trade it. It is risky very risky. See with me I have pretty sound money management and understand how I plan to go head to head with a bull and grab him by the horns and put him down. Or even better I love to run up to a big grizzly bear with a tooth ache and punch him in the jaw. Its not for rookies this type of madness can get you killed. Now its people like me now drive the price back to where it came but there is no guarantee it price will come back down. So you have to know what you are looking for to get in and get out with ease so you dont get suck in a trap. Then the dust settles and market goes back to the same way it was. Bulls are look for a chance to go long and bears are looking for a chance to go short based on there chart. NFP is now a thing of the past and factored in the charts now.
Then you have big news people all are aware of. That is actually traded everyday weather you know it or not. Start with the US debt ceiling. Long term investors need to be aware of this as they are looking long term. Not day to day but month to month. These guys are going to short USD. They got the money to withstand large swings so they got the money to affect the market (for the most part). Now once they and long term Institutional investments start moving there money for future speculation of where USD is going. Price starts to go down. Now you got trend traders. Since the trend is now down they are looking to get short and they do. Now NFP comes out with good news got a spike in the markets (stated above) but the debt ceiling is still there so price will keep down as the outlook for the USA is alot worse than a NFP report can fix.
All of a sudden the Eruo Debt crisis now hits the spot light and the USA decides to do what the world wants and raise the debit ceiling. Now the US dollar may not be looking so good but also not look to bad anymore. Again long term big money investors start moving there money and we now have an up trend. So the mid term investors follow. Lastly the trend trader follow. By the way when I say trend traders I am not talking intraday trend traders. I am talking short term investors that will be in a trade a few days a a couple weeks to months. There is a difference between trading and investing.
So how to trade the news? You really cant you invest with it. Using NFP and other new events like that as indicators in the overall strength of the investment. Meaning You are now investing in USD as the EURO is got there issues. As these NFP reports come out they dont mean much to an investor but if the report keeps coming out showing gains and employment is getting better. Means you investment is gain strength. If the reports are not then your investment is getting weaker.
Like stated in the beginning this was no way intended for trading or investing advice. Just my opinion on this topic.
Thats alot of typing I am going to bed night all
News affect trading market, effect may be minor or major but most of the financial and economic news affect market trend. Even I do not prefer to any time schedule for trading.
and what economic calendars are you use? What is âBest of the Bestâ?
to avoid following the news for trading you have got to get experience and also I advise you to build up your own point of views and guessing based on good experience with the market so you wont need much the news + not everything they say in the news is for your advantage !
Is it not interesting that regardless of any given news announcement PA will innevitably respond to technical OB/OS levels. Iâm refering to intraday rather than collective news over an extended period of time that will drive a trend.
Iâm a newbie myself and will avoid trading the news for a while. The main types of news to steer clear from are:
Primary News
Secondary News
And obviously the dreaded NFP (Non Farm Payroll) avoid all day if you can.
Forex Factory is a great source and they have a calendar that you can look at at the start of every week to give you an idea of whatâs coming up. It has a little icon next to all of the news stories and colours them in order of importance/potential impact. Red being the most important. It also gives you a little blurb and tells you how it may affect the currency, so you start learning as you check each week.
If you give yourself a couple of hours buffer from those news stories, that should be good.
Good luck with it.
Geez⌠Some thread diggers are around today⌠:59:
Wise advice for new traders all around, NFP is a nightmare lol thanks for your comments TammyK :45:
wise words indeed thanks for your comments bob :45: