Forex News Trading Basics

Forex news trading is a strategy that involves trying to predict how a news announcement will affect the Forex market and then profiting from it. During periods of economic announcements, the market can be very volatile and subject to large swings. If you can accurately predict what will happen in the market, you could stand to realize a substantial profit. Here are the basics of news trading and what it means to you as a trader.

Economic News

If you have spent any amount of time trading in the Forex market, you will know that during certain times, the market reacts rather drastically to specific events. You might be trading and watching the price move almost straight across the screen all day. Then something happens and the price shoots straight up by 300 pips in a matter of minutes.

This typically occurs because of a news announcement. For example, a country announced its non-farm payroll for the month and it was much worse than expected. When this happens, the value of a particular currency can plummet in comparison to another currency.

When economic news announcements occur, it can cause wild swings in the market.

Forex Calendar

Those who trade the news often look at the Forex calendar to determine when to get into the market. Portable, looking at a resource like Forex Factory can tell you when the high-impact news announcements are scheduled to be released. On Forex Factory, the high-impact announcements are red in color. Once you see an announcement on the calendar, you plan to trade during that particular time.

Profiting

If you can accurately predict what will happen in the Forex market when a news announcements takes place, it could put some serious pips in your account. For example, if you were on the right side of the market when that 300 pip swing took place, it would net you 300 pips in only a few minutes. Some traders then take a trade in the opposite direction, expecting the market to move back down towards the normal range and get close to another 300 pips.

Taking the Risk

Forex news trading is known to be one of the most dangerous and risky trading strategies out there. If you plan on using one of these strategies, make sure that you understand the risk that is involved. While you can hope to predict what will happen in the market during his announcement, you never really know what will happen until it happens. By that time, it's too late to make a decision.

This is not for the faint of heart.

Hedging

When trading during the news, it sometimes helps to use a hedging strategy. With this type of trading strategy, you put a pending order on either side of the price line. Then, regardless of which way the market moves, you have an order that is in the right direction. Then you simply cancel the other pending order and take your profit on the one moving in the right direction.


Return From Forex News Trading to Forex Trading Systems

Return From Forex News Trading to Forex Trading