Probably the most important tip i’ve seen everyone talk about in trading whether forex/stocks is trading the news or as known as Fundamental Analysis. But as a beginner, how to know if this specific piece of news will affect the market it’s talking about, because i came across multiple news that say positive about the pair/company, but then i look at the chart and it’s going down, so am i missing something here?
and there are some questions i have related to the topic:
1- Is trading the news best before the market opens?
2- If a piece of news has been published in investing.com, how much time will it take to affect the market?
3- should i be sitting 24/7 infront of my computer so that i can take advantage of the news exactly at the moment it’s published ?
First, Fundamental Analysis considers the news. Technical Analysis does not take news into account.
I know only the Forex market so the below applies only to fx and not to any other market.
As a TA trader, if you’re a swing trader, trading the daily chart, then you can safely ignore the news. If you’re day trading or scalping then don’t trade on big news days.
EDIT: Not because the news affects price levels in any way but because banks use news events to accelerate their price movements. Therefore, if you’re caught on the wrong side of the market on a big news day then it could spell large losses for you.
but yet it’s unclear to me when does a piece of news does actually affect it’s market because as i said sometimes the news could be showing positive results but the chart is bearish.
Trading news live is very risky. Even professional bank traders suggest it is risky. Under the current forex climate “news” as in economic data releases is not impacting the market much because of geopolitical events. But sooner or later that will return to normal market conditions. The basics of trading economic numbers is buy if it’s good for the economy or sell if bad for economy. Using free forex calendar data is not fast enough for trading live because the market has low liquidity at these times and moves very fast. If you want to try and trade economic numbers I’d suggest beginning with small risk and marking a horizontal line where the price begins before release. Since using lagging data for your calendar will mean you miss the initial move make sure the actual vs expected is reasonably different and place a buy stop order or sell stop order 15 pips from where the price begun with stop loss the other side of where price begun. For you interested the biggest number released this past week was US Federal Reserve’s rate decision and statement. If you look at the EURUSD hourly chart you will see the price spiked down and up very sharply and quite quickly. If you get serious about trading economic numbers you may like to invest in live market data. A good affordable professional product is MetaStock Xenith. (Also know as Reuters) wishing you all the best with your trading.
Trading Japanese numbers is different because good numbers for Japan cause the Nikkei to rally and USDJPY follows the Nikkei. Otherwise the current geopolitical trading climate has sometimes given USD Safe Haven trading conditions. This means similar to what I explained about Japan the US Equity markets have been driving the risk currencies. The risk currencies are AUD, NZD, EUR, GBP and CAD. You can clearly see a very nice correlation between US Equity Market and especially AUD over the last 3 months. Hope this explains the current climate. Sooner or later the market will return to normal conditions when Fundamentals will drive the market rather than geopolitical events.
Thanks a lot for sharing your information! i’ll make sure i will go into details about these points and improve my understanding on how the market works!