Navigating Forex News: Strategies For Informed Investing

Navigating Forex News: Strategies For Informed Investing – One of the great advantages of forex trading is that the forex market is open 24 hours a day, five days a week (Sunday 5:00 p.m. to Friday 4:00 p.m. ET). Because markets move based on news, economic data is often the primary catalyst for short-term moves. This is especially true in the foreign exchange market, which reacts not only to US economic indicators but also to global news. Here we look at what economic numbers are released when, what data is most relevant to forex traders, and how traders can deal with this market data.

Most Forex brokers have at least eight major currencies to trade with scheduled economic data releases that Forex traders can use to make informed trades. In fact, seven or more fact sheets are published every week (excluding holidays) from the eight most followed countries. So there are many options for those who choose to trade news. The eight main currencies that most traders are familiar with are:

Navigating Forex News: Strategies For Informed Investing

A currency that can be easily traded worldwide. This means you can choose the currency and economic performance that interests you most. However, since the US dollar is typically the “other side” of 90% of all foreign exchange transactions, US economic performance has the most obvious influence on the foreign exchange market.

How To Trade Forex On News Releases

Trade news is harder than it sounds. Not only the reported consensus numbers, but also the whispered numbers (unofficial and unpublished estimates) and revisions to previous reports are important. Additionally, some outcomes are more important than others; This can be measured by the importance of the country publishing the data and the importance of the publication relative to other published data.

Figure 1 shows the estimated times of key economic activity (Eastern Time) for the following countries. This is also the time when Forex market participants pay close attention to the market, especially when trading based on press releases.

When trading the news, you first need to know what the expected exit is for this week. Second, it is important to know what information is important. In general, the most important data relates to changes in interest rates, inflation and economic growth such as retail sales, manufacturing and industrial production:

The relative importance of these publications may change depending on current economic conditions. For example, unemployment could be more important this month than trading decisions or interest rates. Therefore, it is important to keep track of what the market is currently focused on.

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Studies have found that the recovery effect usually occurs on the first or second day, but the effect appears to last until the fourth day. The impact on the flow of buy and sell orders is still very noticeable on the third day and will be observed on the fourth day.

The most common way to trade on news is to look for periods of consolidation or uncertainty and trade behind the news. This can be short-term (during the day) or longer. a couple of days. As an example, consider the chart in Figure 2. After weak numbers in September, the euro is holding its breath ahead of October’s numbers, which are due to be released to the public in November.

17 hours before the release, EUR/USD was capped at the 30-pipe trading range. . This is a great opportunity to place a specific trade, especially since the probability of a strong move is high at this time.

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The chart above shows the uncertainty and uncertainty ahead of the non-October employment numbers released in early November, with two horizontal lines forming a trading channel. Note the increase in volatility when the numbers are released.

As we’ve said before, trading news is harder than you think. Why? The main reason is volatility. You are making the right move, but the market does not have the strength to support that move.

As an example, consider the chart in Figure 3. This chart shows how difficult it is to trade press releases, similar to Figure 2 (but for a different time frame). On November 4, 2005, the market had expected employment to increase by 120,000 jobs, but instead the U.S. economy added only 56,000 jobs. The disappointment caused the dollar to sell off against the euro by 60 points in the first 25 minutes after the release.

However, the dollar’s downward momentum was so strong that the gains were quickly reversed and after an hour, EUR/USD broke the previous low and hit a 1.5-year low against the dollar. There were plenty of opportunities for traders, but the dollar’s strong momentum was such that wages could not sustainably slow the currency’s recovery. It is important to remember that behind a good number, a strong move should also bring with it a strong expansion.

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The chart above shows that while worse-than-expected non-farm payrolls pushed EUR/USD higher in the short term, strong momentum in the US dollar was able to take control and push it higher. Keep this in mind when the US dollar is valued against the euro.

A possible response to a volatility break without risking a reversal is to trade exotic options. Exotic options usually have a barrier and are profitable or unprofitable depending on whether the barrier is broken. The payout is predetermined and based on the premium or option price. These are the most popular exotic options for news trading:

The one-touch dual option has two levels of barrier. Each of these levels must be broken before it becomes profitable and the buyer’s ability to receive payments ends. If the barrier is not broken before expiration, the value of the option is lost. The double tap option is the best option for breaking news trading because it is a pure directional breakout. If the barrier level is violated – including price reversals and later payments.

Single-touch options only have one barrier level, which typically makes them slightly cheaper than single-touch dual options. The same criterion is that payments are interrupted before the barrier expires. This is a good buy option if you can estimate whether the numbers will be stronger or weaker than the market consensus forecast.

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Currency options are a viable alternative for those who don’t mind being buffeted by extreme market volatility until the price moves in the desired direction. Currency options are available through several currency brokers.

The double tap option is the opposite of the double tap option. There are two barrier levels, but in this case the barrier level cannot be broken until it expires – otherwise there will be no withdrawal option. This option is great for news traders who assume there will be an economic release

Foreign exchange markets are particularly sensitive to short-term movements caused by economic news from the United States and around the world. If you want to trade successfully in the Forex market, there are several important considerations: knowing when to expect a report, understanding which of the current releases is most important and, of course, knowing how to trade accordingly. Market movement. Data. Do your research, stay up to date with business news, and you too can benefit.

The offers listed in this table come from a compensatory partnership. These offsets can affect how and where the listing is displayed. All offers on the marketplace are excluded. The sharp price increases in cryptocurrencies such as Bitcoin and Ethereum have caused excitement and fear among market participants. In this section, we examine cryptocurrency price volatility and explore the causes, effects, and possible strategies for this volatile landscape.

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