Forex. How to trade on the news? | FIBO Group Lesson 8
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News trading is a necessary skill for all traders. The publication of the main news can often cause large price fluctuations, especially in the Forex market.
Here are five key points that will help you evaluate most of these movements correctly.
Identify important events.
Do your own research. You need to know the time and date of important events. Use the economic calendar for this purpose. This is a necessary tool to help you plan ahead.
There are many different publications every day, so it is important to know that
will affect the prices of the assets you trade.
If you are a Forex trader, then almost any event that affects the us dollar is an important Non-farm Payrolls, fed protocols, GDP and others.
When trading stocks you need to look at the company’s profits, dividend payments and share split.
To understand market expectations
Then find out what market expectations are for this event. Look at the chart to see what happened last time, how the market reacted, whether the data was better or worse than expected and whether the earnings exceeded your expectations or not.
Use the events of the past to give yourself information about what may happen in the future with your transactions in the background of these events.
Check related events
Explore related events and news. What else can affect the market after the announcement?
Take the data on crude oil reserves. The news is published on Wednesday. If according to these data we see an overabundance of oil, the price of oil should fall. But, on Thursday, at a meeting of OPEC Ministers, a decision may be made to reduce oil production, which means that the price may rise. That’s why it’s important to look at the big picture and not take each event in isolation.
To create a strategy
Stick to strategy. You should clearly know at what levels you want to buy or sell and where to put your stop loss. This will help to add confidence to your beliefs and avoid reflex reactions.
Know when the news fades
Finally, find out when the reaction to the news fades. For example. The CEO of company X announces that he is stepping down. Stocks are falling. But you believe that the fundamental indicators of the company are still very good, and therefore the market reaction to the departure of the head of the company is groundless.
So when the price has fallen, you buy the shares, hoping that they will soon still rise. And if you’re right, you’ve got a great point to enter the market, but if you’re wrong and the price keeps falling, you’ll get a loss.
Remember these simple guidelines while trading. News can be exciting and profitable, but also risky, as it often increases volatility in the markets. Therefore, make sure you are well prepared and always have a reliable trading plan.
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