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News trading-strategy-for-forex


Published on Forex News or Economic News Events are economic indicators issued by various governmental or private agencies with proprietary data source, such as large banks or payroll services (ADP). These currency news events are generally released on a set schedule, such as monthly or quarterly at a certain day of the month or so. They are different from Equity Market news where companies issue their earning’s reports or future projections. Currency News releases affect an entire aspect of the market and by learning to interpret the news before and after, a Forex Trader could benefit from the proverbial “heads up” of market direction.

Published in: Economy & Finance, Business
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News trading-strategy-for-forex

  1. 1. News Trading Strategy For Forex<br />News Trading is a customized technique of fx trading that takes advantage of the volatilities that happen through release of high-impact news .. Every major economy produces its economic indicators including the Gross Domestic Product, Retail Sales, Consumer Price Index, Short Term Interest Rate, and so on. .. on a regular basis, and many economists will attempt forecast the results of these releases, through combining these estimations and averaging them out, we have what is known as- consensus expectations.<br />News Trading Strategy For Forex(Courtesy of )<br />
  2. 2. News Trading Strategy For Forex<br />News trading usually takes the forecast numbers, or the consensus expectations, and compares it with the actual release figure from the official sources, and if the prediction is off by way of a large margin, market will react right away. .. and by focus your trading on this surprise, news traders can minimize the time spent in trading, the risk related to investing, as well as, increase the potential of gains along the route.<br />News Trading Strategy For Forex(Courtesy of )<br />
  3. 3. News Trading Strategy For Forex<br />Naturally in order to fully understand news trading, we need to build up your personal Forex Strategy. You have to understand the assumptions of news trading prior to practicing this type of trading, because with everything in life, news trading is not absolute, and there is a margin for error since the market may be driven by other elements such as the risk sentiment, order flows, long- term and short- term fundamentals, and let us not forget, the technical approach of the fx pair.<br />News Trading Strategy For Forex(Courtesy of )<br />
  4. 4. News Trading Strategy For Forex<br />The first assumption in News Trading is that market is at harmony. In Essence it indicates that market has already priced in everything that has happened and will occur up to the point of the news release. If the news release happens to be a big surprise, then the market ought to fix itself in the correct direction and achieve that harmony again. As an example, in the event the news is positive for USD, then we can expect USD to gain following the news, so we should BUY United States Dollar.<br />News Trading Strategy For Forex(Courtesy of )<br />
  5. 5. News Trading Strategy For Forex<br />The 2nd presumption in News trading is the fact that market usually exaggerates in its moves. Compare it to the definition of “snow ball” effects as when market begins to push, traders will want to joining in the action, thus causing the market to over move… This really is very correct as we can often see the currency market pushed by high-impact news often for hours or even days. If that is not viewed as market exaggeration, then probably nothing is.<br />News Trading Strategy For Forex(Courtesy of )<br />
  6. 6. News Trading Strategy For Forex<br />Last but not least, news trading presumes that the market will move when a certain level of shock is reached. Needless to say, this so- called shock level is based on historical data, but the assumption is that if for a particular news event, let’s say the Interest release, differs from the forecast by . 25%, then the market will push 100 pips minimal. Therefore, let’s say that if the ECB, or the European Central Bank, releases its interest rate at 2. 00 % in which the market is expecting a 2. 25 %, we ought to see traders selling the Euro straight away by at least 100 pips… as a matter of fact, if this ever occurs in the real market, It's my opinion 100 pips is probably on the low estimate… news such as this could shift the market by 200 and even 300 pips very easily.<br />News Trading Strategy For Forex(Courtesy of )<br />