Perhaps you can give an example or two?
There are many reasons why people choose to analyse news when they are trading forex. For some, it is a way to get an edge on the market. They believe that by understanding the news and its impact on the market, they can make more informed decisions about their trades.
Others use news analysis as a way to confirm their own analysis of the market. By looking at how the market reacts to news, they can validate their own understanding of the market and the direction it is moving in.
I agree with what you say about back-testing. It’s a contradiction - the retail trader won’t factor in news events. I personally belive technicals control the movements on the chart 95% of the time. Big news stories will either take over from tevhnicals for a short time period or give a directional push to markets in flux. I think most technical traders don’t like big news stories - unless you’ve got inside knowledge or are part of the story / high up in politics, then I’m certainly not smart enough to know which way the markets will go cos I don’t know what the result of the story will be (Brexit vote etc). It does make me wonder about the motivation behind political choices like the constant heating up and cooling down of the trade war with China a year or so back…
What people?
Most traders I know just stay out during news like NFP, CPI, etc …
They don’t “analyse” anything.
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The fundamental ( news ) traders are the most stupid type of traders that exists, at least most of them, they can’t see the obvious, and that is that news are just pure market manipulation, its smart money taking the opportunity to buy or sell, there are only two situations where the news might make a substancial move in one direction, one, is when they are done accumulating, and they will push in one direction continuing to buy or sell, and they will just keep buying or selling and pushing the price higher or lower, those are the times when you either get in or you will stay out of the market and miss the move. You can’t know when this will happen or what news will trigger these moves. I have seen NFP moving the markets hundreds of pips and i have seen NFP move the market 20 pips, the same for other releases/news. The second situation is news that ou can’t or will be hard to predict, like the coronavirus, some catástrofe, a terrorist attack, things like these. Moves are planned for weeks or months, they are accumulating and they won’t change their mind based on a news release, they are already planning way ahead, if you see a report with bad numbers for a currency, they had already predicted that, they have already predicted most of what the fundamental traders are looking in today, and they already decided the long term direction probably months ago.
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I tend to agree with @TP89 . When I was new to trading I didn’t really take it seriously when people talked about market manipulation, however, with experience I’ve realised that it’s an unfair world out there and have become quite alot more cynical… Now, as @averied says, I tend to try to stay out or hedge heavily when a big news story is about to break. Incidentally, the only news that I ever bet heavily on and won was the drop in markets with coronavirus - I just couldn’t see any other logical outcome. Even then, I stayed out of forex (March 20) and moved into indices (shorted the FTSE100).
People analyze new to gain a thorough understanding of the market and then implement trading strategies accordingly.