News forex is one of the important factors affecting the fluctuations of the foreign exchange market. Traders can apply news-based forex trading strategies to take advantage of profit opportunities from strong fluctuations. This article, Learn Forex Trading, will help you better understand forex trading according to the news. In addition, guides you on how to analyze this effectively.
Is trading according to news forex effective?
Before starting to trade the news, traders need to understand some basic information about this trading method.
What is news forex trading?
News trading is a trading method based on market-related information. This includes the economic, political, and social situations of countries and regions around the world. This news can have positive or negative effects on the value of currencies. Thereby, creating trading opportunities for traders.
Trading the news can be highly effective. If traders have the ability to read, analyze, and properly evaluate important news. In addition, traders also need to have good trading skills, reasonable capital management, and discipline. However, it should be noted that trading forex according to the news is not a method suitable for all traders. You need to have enough knowledge and experience to trade effectively and safely.
Important forex news that every trader should know
Not all news forex has an impact on the foreign exchange market. Important news is news that has the potential to cause large and prolonged price fluctuations. Important news often involves the following factors:
- Interest rate: Interest rate is one of the factors that determine the value of a currency. High interest rates often increase the value of money. On the contrary, when interest rates are low, it often reduces the value of money.
- Economic Growth: This is an index that measures the health of a country or region’s economy. Indicators that measure economic growth, such as GDP, CPI, PPI, PMI, NFP,… These are important news that every trader should follow.
- Political and social stability: These are factors that influence investor and consumer confidence in a country or region. High political and social stability often increases the value of a currency. Political and social events, such as elections, votes, wars, crises,… Those are important news forex that every trader should follow.
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Places where traders can update news forex
To trade forex on news, you need fast, reliable sources of news updates. You can use the following sources to stay informed:
- Websites specializing in news such as Forex Factory, Investing.com, DailyFX, FXStreet, etc. These websites provide you with an economic calendar, news, technical analysis, and basic,learn about forex trading for newbies…
- Media channels specializing in politics and society such as Bloomberg, Reuters, BBC, CNN, etc. These websites provide you with international news, analysis, and forecasts from experts.
- Indispensable applications, software, and forex trading tools such as MetaTrader, TradingView, Forex Calendar, etc.
Traders should choose appropriate news sources. In addition, it is necessary to compare and double-check different sources of information to avoid misleading information.
How to effectively utilize forex news in trading
Once you know how to read and analyze forex in a basic way, traders can apply it to start trading with the news.
How to read forex news to trade effectively
To read forex news effectively, you need to distinguish between important and unimportant news. News that affects a specific currency pair or multiple currency pairs. News that affects the market.
Traders can use an economic calendar to view the importance of forex news, usually expressed by a number of stars, colors, or letters. You should focus on news of high importance, as they have the potential to cause large and prolonged price fluctuations.
How to analyze forex news when trading
To trade forex according to news effectively. Traders need to have a way to read, analyze, and evaluate forex news accurately and quickly.
- Level of importance: Traders need to distinguish between important and unimportant news. News that affects a specific currency pair or multiple currency pairs. That affects the short-term or long-term market,…
- Actual results: You need to see the actual results of the news. That is, the actual figures are released when the news is released. You can compare actual results with forecast results and previous results of the news. Thereby, evaluate the good or bad level of the news.
- Market reaction: You need to observe the market reaction when news is announced. That is, price fluctuations after news is released. You can use charts, indicators, signals,… to analyze the market.
News forex trading strategies
There are many different trading strategies. It depends on each trader’s goals, style, and skills. However, there are two popular and effective news trading strategies.
Reversal trading strategy (Initial Spike Fade)
Forex news reversal trading strategy is a trading strategy based on the assumption that the market will overreact to news. After that, the market reaction will return to equilibrium. You will wait for the price to create a spike after the news is announced. You will then trade in the opposite direction of that movement. Expect the price to return to the level before the news is announced.
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News Straddle
This is a trading strategy based on the assumption that the market will fluctuate strongly in either direction after the news is released. However, the trader does not know in advance what that direction is.
The trader will place two pending orders, one buy stop and one sell stop. At two prices one distance above and below the current price, before the news was announced. When news is announced the price fluctuates strongly in a certain direction. One of your two pending orders will be activated, and you will trade in that direction.
Things traders need to keep in mind
Trading forex on the news is a high-risk trading method. Requires you to have skills, knowledge, and experience. You need to keep in mind the following when trading forex according to the news:
- It is necessary to have a clear trading plan that includes goals, strategies, risk management, discipline, etc. Traders need to follow their trading plan and not let emotions dominate their trading decisions.
- Traders need a source of quick, accurate, and reliable news updates. In addition, it is necessary to check different news sources and not believe in rumors or false information.
- Traders need to choose a trading account that is suitable for the news trading method. The trading account has reasonable leverage, low transaction fees, and the ability to execute orders quickly,…
So the article on Learn Forex Trading has introduced you to the form of trading according to news forex This is an attractive trading method, but also full of challenges and risks. You need to be thoroughly prepared, careful, and equipped with knowledge when trading the news.
FAQs:
What is news forex trading?
Forex trading based on news is a trading method based on the latest information about the economic, political, and social situation of countries and regions around the world.
Where can traders update market news?
Traders can update market news from reputable sources such as websites specializing in financial news, media channels, political and social media, etc.
What forex news do traders need to pay attention to?
There is a lot of market news that every trader needs to pay attention to. These include information about interest rates, economic growth index, political and social news, war, natural disasters, etc.
