I joined baby-pips and learnt how to trade and do some technical analysis on the market chart. I traded on a demo account and then I started trading live now, i have made tremendous profit thanks to baby-pips but i have one problem. I recently tried to trade using fundamental analysis (trading on the news) so i got on my computer and logged on to NETDENIA.COM but what i saw wasn’t what i expected. I know for sure when trading the news and you something like the U.S dollar is strong you should pair it with a weaker currency for example Japanese yen (USDJPY) and then go long. Basically I need help or assistance on how to assess a news information before trading.
Do what most traders do, avoid trading the news. What one analyst sees as good news, another sees as neutral, and a third sees as bad news
I agree with Eddie. Trading the news can be [I]terribly[/I] high-risk: the swingy spikes, sometimes in [I]both[/I] directions, can easily be of such a size that it’s easily possible to get the overall direction right and [U]still[/U] get stopped out, while doing it without a stop-loss can readily be suicidal.
Funny enough I watching a webinar recorded a couple of years ago by a very experienced educator. The title of the webinar was ‘the one indicator that a trader must never use’.
That indicator was ‘the news’.
Kinda surprised me, I know this guy is experienced although he is now heavily into educating and all that goes with that, but was still surprised. It’s like an engineer having a large toolbox with one tool having a large sticker attached ‘danger, do not use’.
Like any tool, if in the wrong hands it can be dangerous, but again like most tools it can be learned, admittedly takes a lot more time.
Most recent examples where I traded using the news was pre-release UK retail news, see here for details.
Then the next post I was watching for news. Took a while but up came the Fed with the goods, was able to trade Gold along with eur/usd based on the fed news (statement).
Likewise, by judging various reactions in the market to that news I was able to look for a couple of longs on the S&P (helped by the s&p action post fomc, was evident that there was money going into stocks for whatever reason)
So too, by watching Gold post fomc and Eur/Usd it was evident that Eur/Usd would fall back after any possible manipulation to get it back up to gap fill under 1050 (had figured 1020)
So all those trades were helped by using the ‘do not use’ tool - but like I say - it takes a while to learn it.
News have a great impact on the market and you have to be very experienced to predict its movement and place trades accordingly.
News is a catalyst and in no way a guarantee of direction
Some things to bear in mind when looking to trade the news would be:
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Some market players will typically front-run upcoming news events anticipating a particular figure. As a result the market reaction after the figure is released isn’t always what you might expect.
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As major news events are often front-run that’s what you’ll want to be doing as well if you’re going to trade news regularly. You don’t want to be stuck in a trade around break even when a major news event is coming out. You want to be in the trade from a while back and sitting on a nice buffer - if the news goes your way then you’ll be able to sit out any initial whippy trade and if it doesn’t you’ll be out at around B/E at worst probably.
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Some news won’t shift the market as it’s not one of the hot button items that the market is focusing on currently (usually there’s only a few of these) e.g. a news release ahead of NFP can often be ignored by the market.
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Sometimes the market won’t move the way you might anticipate from the headline number as it can take a bit for some participants to properly digest the data that’s been released and come to a decision e.g. a headline number might look weak at face value but when digging through the full data in the release + any prior revisions a different picture might emerge. Market participants who are committing big money often won’t be taking the plunge just off a single headline number.
All in all you’re better off, in my opinion, keeping the overall fundamental picture in mind and trading off activity around key levels rather than just trading the news itself. When I have an open trade and there’s a major news item coming up I’ll make a decision based on the situation of the trade. I’ll either close it before the news event or, if I have enough of a buffer and I’m anticipating a number which would be good for my trade, leave it open and let it play out.
One thing you can do is to avoid trading the news releases till you educate your-self enough to understand fundamentals.
for short term trades I always avoid news “any news is old news - predict the news before it is released and you’re laughing”, however we all know this is a mathematical impossibility when considering consistency. Using news for longer term trades (underlying fundamentals) is more smart. The choice is yours
Interesting perspective, David. For me, the exact opposite applies: the shorter my trades, the [I]less[/I] overall market exposure I have and concomitantly the [I]less[/I] chance of having a position affected by unexpected news. 
Indeed. We generally read the news when market was affected before or a long time later, so short-term trading is useless. I.e, when I read this story, I truly think USD would grow strong against in most pairs, especially majors but how can we know an exact price to entry and take profit? NO.
Both on the growth and the inflation front, USD has room to rise. 2016 is also election year. With many US companies parking earnings abroad to avoid taxation on repatriation, a significant tax reform also has the potential to be USD positive", says RBC Capital Markets in a research note.
Hi my Friends, I prefer always chartism, for short and long trading, never news, I lost a lot of money for the news, only chart make me gain money
Data moves the markets. You must be in constant contact from 3 am ny time to 9 am ny time to prospere the most volatile moves in fx.
Data does move the markets, but not all data is created equal in terms of its importance and if/when it will have an impact. Understanding the macro fundamentals aspect of the markets is a lot of work, but it’s work that will greatly improve your odds of getting the directional bias and timing of moves right.
Thank you Lexy’s and Pipcrawler,
What I witnessed this past week was spectacular in movement of pips…all due to release of data. One item I was taught that continuation happens when the other side of the world has yet to awaken. And I have noticed that certain s/r levels are threatened when the other side of the world has not been given their chance to voice their opinion as of yet. I continue to learn so much and hope this education will pay off in the end.
Thank you Lexy for your unrecognizable words as I have left open a dictionary on my compute to research the unknown…nothing like putting the 'ol brain receptors to work.
Cheers,
Tim