How to read news for forex trading

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Trading using fundamental analysis.

  • Step 1: Identify a news event you want to analyze. Remember that the news event that are high impact or red have the highest probability of moving the …
  • Step 2: Analyze the feasibility of the news event. This is done by analyzing the difference between the historical actual and historical expected …
  • Step 3: Trade the news event. Once you have decided that a specific news event is worth trading on a specific currency pair, then it is time to trade …

Full
Answer

How to trade Forex on news?

Since the dollar is one side of many currency pairs, U.S. economic releases tend to have the most pronounced impact. The most common way to trade forex on news is to look for a period of consolidation ahead of a big number and trade the breakout on the back of the number.

How do I read the news on the forex factory calendar?

Clicking the news detail tab located just to the right of the news title on the Forex Factory forex calendar gives some insight as to what the news is all about, why it is of importance to the market as well as a hint on how often that piece of news is traded in a calendar year. Closing out this section is the numbers.

Is the forex news you’re getting fact or fiction?

You also have to be able to determine whether the forex news you’re dealing with is fact or fiction, rumor, or opinion. Economic data rumors do exist, and they can occur minutes to several hours before a scheduled release of data.

Is there a way to do fundamental analysis in forex trading?

Yes there is a way. This form of analysis is a branch of a greater tree called Fundamental Analysis. In this article we will investigate the above questions and provide you with a framework to deal with and be equipped to operate in the forex market, trading the news. What is fundamental analysis?

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What is forex calendar?

The forex economic calendar allows for planning ahead. For example, if a Nonfarm Payroll report is set to be released, traders will know that this indicator has the potential to move FX markets substantially, so awareness of the timings means they can plan their forex trades accordingly.


What does it mean to plan your trades based on economic calendar events?

Being able to plan your trades based on economic calendar events means you can ready yourself for potential turbulence in price. When an event listed on the calendar occurs, there may be expected a period of volatility if data is released well above, below or in line with expectations.


What are the benefits of using DailyFX?

The top benefits of using the DailyFX forex economic calendar include: Being able to manage risk effectively. Being in a position to plan ahead. Having access to extra, helpful features for customisation.


What is economic calendar?

An economic calendar is a resource that allows traders to learn about important economic information scheduled to be released. Such events might include GDP, the consumer price index, and the Non-Farm Payroll report.


How long before a data release do rumors occur?

Economic data rumors do exist, and they can occur minutes to several hours before a scheduled release of data. The rumors help to produce some short-term trader action, and they can sometimes also have a lasting effect on market sentiment.


Can forex traders see the future?

Successful forex traders don’t have mystical powers (well, except for Pipcrawler, but he’s weirder than he is mystical) and they can’t see the future. What they can do is see through the blur that is forex news and data, pick what’s important to traders at the moment, and make the right trading decisions.


Do forex brokers have live news feeds?

Many forex brokers include live newsfeeds directly in their software to give you easy and immediate access to events and news of the currency market. Check your broker for the availability of such features, not all brokers’ features are created equally.


How to prepare for forex news?

How to Prepare For the Forex Trading News. The first thing you need to remember is that these news are all scheduled, so you want to check an economic calendar to be aware of these announcements. Remember these announcements tend to move the market quickly and may cause a big movement against an open position.


Why do traders use news releases?

However, it is also beneficial for long-term traders who would like to see trends on a yearly basis. This is because reports like GDP, inflation rates, and unemployment rates are released quarterly to annually – not so fitting …


How does economic news affect the market?

Economic news affects market behavior. News will move the prices sharply and may start a new directional movement and trend. Forex traders must be aware of these announcements. It is important for traders to trade news announcements with a reliable forex broker, that keeps spreads low and the least slippage possible.


What are the Pitfalls of Trading the News?

Pitfalls of trading the news. Spread . There are occasions during the release of news when the broker will increase spread for a short period of time. This is done in order to fulfill all the order, due to a temporary lack of liquidity caused by increased order volume.


How to analyze news events?

Step 1: Identify a news event you want to analyze. Remember that the news event that are high impact or red have the highest probability of moving the market. Therefore naturally look at any of these news events to analyze. Ignore the orange and yellow news. Step 2: Analyze the feasibility of the news event.


How long after news does the PIP change?

It is worth looking at the pip change 5 minutes after the news. And 15 -30 minutes after the news, because many a times certain news releases retrace back to their original price often enough in order to establish a pattern. view video here for various methods on trading the news.


Is there a universal trading strategy?

Therefore there is no universal trading strategy to trading the news. You will need to develop your own per news event, per chart. For the sake of completeness it will be shown to you how to find the key news events worth trading and how to also find the news events that are not worth your time.


What happens when news hits?

When the news hits, the price tends to spike in one direction or has a muted reaction to the data as traders digest the outcome against market expectations.


Why is it called “movement doesn’t match what the report would lead you to believe”?

This is a common phrase used in the forex market because often times it seems that when a news report is released , the movement doesn’t match what the report would lead you to believe. For example, let’s say that the U.S. unemployment rate is expected to increase.


What is forex chart?

A forex chart is simply a graphical depiction of the exchange rate between to currencies. It shows how the exchange rate of currency pair has changed over time. For example, the chart above ( Euro vs. U.S. Dollar) shows how the exchange rate between Euros and US dollars has fluctuated over time.


What are the different types of forex charts?

Forex traders have developed several types of forex charts to help depict trading data. The three main chart types are line, bar, and candlesticks. For forex traders, candlestick charts seem to be the crowd favourite, and it’s easy to see why.


Why do traders use currency charts?

Currency charts help traders evaluate market behaviour, and help them determine where the currency will be in the future . To help make sense of the currency movements depicted on a chart, traders have developed a number of different visual guides to assist them – indicators.


What is a pip in forex?

A pip is simply a unit you count profit or loss in. Typically, forex pairs are quoted to four decimal places (0.0001). The ‘1’, four spaces after the 0, is what is referred to as a pip.


What is the Bollinger band indicator used for?

Forex chart with the Bollinger Band indicator applied. From a traditional perspective, the bands are used to highlight potential oversold and overbought areas.


Why is the Forex Calendar important?

It is important for news traders in forex who want to use the forex calendar on Forex Factory to understand the features that are available for maximization of its use.


What is forex calendar?

The forex calendar is simply put, a schedule of news releases impacting the socio-economic and political sphere of several globally important economies. The news releases that can be found on the forex calendar include news about interest rate statements, inflation data, data on housing, employment and trade.


What is forex factory?

Forex Factory is the name of a popular forex trading online forum. The Forex Factory website is indeed a great resource for all categories of traders. Here you get to see traders and market players from the retail and occasionally from the institutional side of the market.


What does yellow mean in news?

It shows three colour codes to demonstrate the market impact the news event is likely to have on the market. Yellow stands for low impact. Low impact news have very low market impact and do not provide enough tradable volatility. Orange stands for medium impact, and red is for high impact.


What is the ISO code for forex?

In order to read currency pairs correctly, traders should be aware of the following fundamentals of a forex quote: ISO code: The International Organization for Standardization (ISO) develop and publish international standards and have applied this to global currencies. This means each country’s currency is abbreviated to three letters.


Why are spreads tighter in currency pairs?

Spreads tend to be tighter (less) for major currency pairs due to their high trading volume and liquidity. The EUR/USD is the most widely traded currency pair, so it is no surprise that the spread in this example is 0.6 pips.


Why do currency quotes always involve currency pairs?

These quotes always involve currency pairs because you are buying one currency by selling another. For example, the price of one Euro may cost $1.1404 when viewing the EUR/USD currency pair.


Google Alerts

The first step is to setup Google Alerts for the news items that you want to follow. These are simply Google searches that you can save and access at any time.


Feedly

Now that you have some custom RSS feeds setup, it is time to put them all in one place. Feedly is a free RSS reader that makes it super easy to make your searches easier to read.


Conclusion

That’s all there is to it. You can always change your currency news sources and Google searches according to what you need and what you are trading.

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Which Currencies Should Be Your Focus?

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With at least eight major currencies available for trading at most currency brokers, there is always a piece of economic dataslated for release that forex traders can use to make informed trades. In fact, seven or more pieces of data are released almost each weekday (except holidays) from the eight major most-followed count…

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When Are Key News Releases?

  • Figure 1 lists the approximate times (Eastern Time) of the most important economic releases for each of the following countries. These are also the times that players in the forex market pay extra attention to the markets, especially when trading based on news releases. Figure 1: Times at which various countries release important economic news

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How Long Does The Effect Last?

  • According to a study by Martin D. D. Evans and Richard K. Lyons published in the Journal of International Money and Finance (2004), the market could still be absorbing or reacting to news releases hours, if not days, after the numbers are released. The study found that the effect on returnsgenerally occurs in the first or second day, but the impact does seem to linger until the fo…

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How to Actually Trade News?

  • The most common way to trade news is to look for a period of consolidation or uncertainty ahead of a big number and to trade the breakouton the back of the news. This can be done on both a short-term basis (intraday) or over several days. Let’s look at the chart in Figure 2 as an example. After a weak number in September, the euro was holding its breath ahead of the October numbe…

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Trading News with Exotic Options

  • One potential answer to capturing a breakout in volatility without having to face the risk of a reversal is to trade exotic options. Exotic options generally have barrierlevels and will be profitable or unprofitable based on whether the barrier level is breached. The payout is predetermined and the premium or price of the option is based on the payout. The following are the most popular ty…

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The Bottom Line

  • The currency market is particularly prone to short-term movements brought on by the release of economic news from both the U.S. and the rest of the world. If you want to trade news successfully in the forex market, there are several important considerations: knowing when reports are expected, understanding which releases are most important given current economic …

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What Is Fundamental Analysis?

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Fundamental analysis can be thought of as the approach to analyzing a financial instrument using macroeconomic factors,such as 1. business health, 2. taxes, 3. gross domestic product, 4. unemployment rates, 5. interest rates and socio-political stability. The aim of using this form of analysis is to come to a consensus on the “…

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Understanding The News Releases

  • Let’s delve deeper and understand where you can find news releases, how you can use fundamental analysis for yourself and what the number actually mean. Where to find the news. Three top sources to find news releases are listed below: 1. www.investing.com 2. www.forexfactory.com 3. www.myfxbook.com For more valuable trading resource click here. U…

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Trading Using Fundamental Analysis

  • Every News event reacts differently on every chart. Therefore there is no universal trading strategy to trading the news. You will need to develop your own per news event, per chart. For the sake of completeness it will be shown to you how to find the key news events worth trading and how to also find the news events that are not worth your time. Step 1: Identify a news event you want to …

See more on forexmasteryhq.com


Pre-Entry

  • Pre-entry means that you enter the market before the news events actually happens. Usually 5 or 10 minutes before the actual news event. PROS: 1. If correct, you could potentially gather maximum profits of a move. CONS: 1. Maximum risk exposure, and potential of sudden loss to your trading capital. Makes this method highly unpopular amongst fundamental traders. The mo…

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Post-Entry

  • Post entry refers to entering the market after the news release. Once the numbers have been understood. This entry usually occurs within 5 minutes of a news release. PROS 1. Once the economic data is available, you will be able to determine if it is worth entering the trade or not. 2. Most major news events can retrace back to their original positions. Therefore there is a potenti…

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Pitfalls of Trading The News

  • Spread There are occasions during the release of news when the broker will increase spread for a short period of time. This is done in order to fulfill all the order, due to a temporary lack of liquidity caused by increased order volume. How is this done? A large majority of traders use pending orders prior to the release of a news event.An increase in spread just before the release of a ne…

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