How to Trade Forex Using News Releases

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The news can bring the potential for significant rewards for Forex traders. In this instance, the “news” refers to releases of economic data. This data can include information such as inflation rates, unemployment rates and GDP.

Trading at the time that these releases are made can be rewarding. However, it also comes with a significant amount of risk. Trading on news without a definite plan is not recommended. Using an economic calendar is an important part of this planning.

Reading an economic calendar

An economic calendar is an essential tool for any trader who does not want to miss out on important events. It lists the previous reading for an indicator, the forecast and the actual reading. The previous reading and the forecast are listed first and the actual reading is added when the news is released. Try dailyforex.com for up-to-date news items that will assist you while trading.

If the actual reading is better than the forecast, the currency is likely to appreciate. The reverse is also true. The bigger the difference is, the more significant the effect on the market is.

Important tips for acting on the information

There are several tips that can be useful for a trader who wants to optimize their success in trading Forex using news releases.

– Concentrate on the news that has the potential of having the greatest effect on the market.

– Wait until the relevant release has been published and then proceed with trading according to plans.

– Understand that the market usually reacts to a release of news for between 30-minutes and 2 hours.

– If the reaction of the market is not as expected, do not be tempted to go against the market. Some information may have been misinterpreted when making forecasts. It’s always best to follow the market’s trend.

– Wait until indications are strong before going into a trade.

Using these tips helps to reduce risks and increases the chance of successful trading.
There are different trading strategies that can be used.

Popular strategies to use
Here are three popular strategies that can be used by Forex traders acting on the news.

Slingshot strategy

This strategy enables a trader to scale out of winning positions. This is useful when there is uncertainty about how long prices will go in the trader’s favor. Scaling involves the partial closure of the position in order to reduce risk.

Trading on expectations

This involves trading in line with market sentiment. These sentiments can be short or long term. In order to succeed at this strategy, a trader needs to:

– Have up to date knowledge of upcoming economic news releases.
– Monitor the market’s reaction to releases.
– Understand how different news releases affect each other.

Trading spikes

This is the strategy of trading on very important news or economic releases. Most traders who use this strategy wait to see the effect of such influential releases before entering the trade. It’s also a good idea to place a Stop Loss in order to reduce risk.

This information should form a basis for helping you to trade Forex using news releases.

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ABOUT THE AUTHOR

Kristina Knight-1
Kristina Knight, Journalist , BA
Content Writer & Editor
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Kristina Knight is a freelance writer with more than 15 years of experience writing on varied topics. Kristina’s focus for the past 10 years has been the small business, online marketing, and banking sectors, however, she keeps things interesting by writing about her experiences as an adoptive mom, parenting, and education issues. Kristina’s work has appeared with BizReport.com, NBC News, Soaps.com, DisasterNewsNetwork, and many more publications.