Simply put, this is the act of trading news events that drive the
forex market. These news events are the leading indicators responsible
for the move of currency prices in the market. There would not be any
forex market without fundamentals. When you understand how these
fundamental news events work, you will be able to take full advantage of
each of them. It is necessary to try to analyze these high impact news
events carefully in order to help you grow your account and provide you
an enabling environment to grow your income and attain financial
stability.
Many novice traders are only astonished after they realize the way their trading account has been wiped out in a single time frame by just the release of one high impact news item and their profitable trade turned into a loss in a matter of seconds. But the experienced forex traders anticipate the high impact news events and take adequate steps to take advantage of them, thereby adding value to their trading and making more profit in a consistent manner, almost like a routine. it is heart warming to know that most news events are released on monthly basis at the same time, making preparation easy.
So, forex news trading is designed to take advantage of market volatility during the releases of these high impact news reports that surprise the market. The major factor here is the element of SURPRISE.
This is how it works. If the market is expecting for instance, the US Non- Farm Payrolls to create 120k jobs for the past one month, and the reports released showed that some 130k jobs were actually created, we can rightly say that the number of jobs created in the US for the past one month is better than expectation because it is 10k more than what the market was expecting. But is the 10k more jobs created enough to surprise the market? The surprise may push the currency prices for a few seconds and retrace because the surprise was not huge enough.
But if the number of jobs created in the past one month was 250k, which is 130k better than expectation, the surprise in the market would be huge enough to drive the currency prices further and the impact will be sustained for a longer time. This is what fundamentalists- those who trade the news look forward to, in each report, so as to take advantage.
Fundamental news trading is not a one way traffic scenario whereby it is just one way to trade the news. There are several ways and some are as follows:
MARKET SENTIMENT TRADING.
The mood of the market is simply referred to as market sentiment. This mood is generated by sustainable news releases in the past couple of hours to probably a month ago. The huge impact of the news release is enough to drive the market prices for a month and at times for up to three months. These news reports are usually Central Bank Statements,Speeches, Press Conferences, Testimonies, Interventions, etc. where major decisions affecting the economies of various countries are taken.These decisions could range from Interest Rate cut or hike, announcement of QE Program ( Quantitative Easing), Economic Out look Forecasts, Devaluation of Currencies, etc. And each of these decisions will have a lasting impact on the currency of that particular country for a very long time, thereby creating the mood of the market.
This mood gives the experienced forex trader the opportunity to place trades and hold such positions for a long time. That is why such orders are called POSITION TRADING. Unlike the conventional news trading that lasts for a few minutes to a couple of hours.
PRE-NEWS TRADING:
This form of trading is only related to the expected news report. The way and manner investors are reacting to the consensus figures being expected from an upcoming news event. For example: If the consensus figure by the economists surveyed is put at 120k new jobs to be created by the US in the past one month, and the previous month saw the creation of 220k jobs, forex investors will like to believe most of the time that since the US is about to add just only 120k jobs, the difference between the two months is 100k and this will be enough to create the impression that the US Dollar will weaken against major currencies and investors would like to sell the US Dollar ahead of the news release in anticipation of less jobs created in the past one month. This method of forex trading is simply- Pre- News Trading, that is Trading Before The News.
It could be Interest Rate Decision being expected. Once majority of the analysts surveyed expect any Interest Rate hike or cut, investors will be buying the currency in anticipation of an Interest Rate hike
and conversely, selling the currency in anticipation of an Interest Rate cut. These are just two examples of how Pre- News Trading works.
REAL NEWS TRADING:
This is the real focal point of forex fundamental analysis. Some call it the "High Point", "The Numero Uno""The Real Deal" ," The Genesis", " Eye Opener" etc. These acronyms succinctly describe how important and relevant this aspect of news trading is. If you must succeed as a professional forex trader, this is the aspect of trading that will give you the cutting edge.You need to focus attention 100% of the time when considering the analysis of fundamentals as a prelude to trading the news.
Once the news hit the wires, you are on your own. The way you use it determines the out come you are likely to get. You must have prepared your trade plan well ahead of time in anticipation of the news report. The impact generated by the news release will create the volatility in the market while the element of surprise will create the MOMENTUM that determines how much longer the impact can last. So the way you are able to analyze the news report and scrutinize every detail to place a trade will be shown by the results you get. There is no universally acceptable standards on how to analyze reports and how to trade every news item. It is purely an individual thing. This is the reason
why some fail where others succeed. There is no need emphasizing the fact that if you are not knowledgeable enough in the act of forex trading, you cannot make it in forex trading. You need to study and study and study to achieve greatness in forex trading.
Do not believe the reports or adverts in the newspapers or on the internet that you can become a professional forex trader in a few minutes. They want to take your money.Some forex brokers are the most guilty of this fraud because they are interested in taking your money. Ask yourself this question, why is it that 98% of forex traders now lose their money in the latest survey? Why is there a proliferation of forex brokers and countless number of fake forex brokers? The forex market is lucrative for them because the eagerness of new forex traders to make quick money trading forex, expose them to be gullible for deceit. You must check the reviews of whatever material you want to acquire to help your trading experience, although I do not recommend any such rubbish, except the acquisition of knowledge.
One aspect of trading is never enough to make you a professional trader. You need a combination of all the key elements of news trading which is:COMPREHENSIVE NEWS TRADING. I sympathize with those who claim to be professional traders and yet concentrate their efforts in trading one aspect of news trading as a whole. Share your knowledge and you will acquire more by so doing. Share every news item or information in the social media. Sread the good news and expand your scope of knowledge. Happy trading.
Many novice traders are only astonished after they realize the way their trading account has been wiped out in a single time frame by just the release of one high impact news item and their profitable trade turned into a loss in a matter of seconds. But the experienced forex traders anticipate the high impact news events and take adequate steps to take advantage of them, thereby adding value to their trading and making more profit in a consistent manner, almost like a routine. it is heart warming to know that most news events are released on monthly basis at the same time, making preparation easy.
So, forex news trading is designed to take advantage of market volatility during the releases of these high impact news reports that surprise the market. The major factor here is the element of SURPRISE.
This is how it works. If the market is expecting for instance, the US Non- Farm Payrolls to create 120k jobs for the past one month, and the reports released showed that some 130k jobs were actually created, we can rightly say that the number of jobs created in the US for the past one month is better than expectation because it is 10k more than what the market was expecting. But is the 10k more jobs created enough to surprise the market? The surprise may push the currency prices for a few seconds and retrace because the surprise was not huge enough.
But if the number of jobs created in the past one month was 250k, which is 130k better than expectation, the surprise in the market would be huge enough to drive the currency prices further and the impact will be sustained for a longer time. This is what fundamentalists- those who trade the news look forward to, in each report, so as to take advantage.
Fundamental news trading is not a one way traffic scenario whereby it is just one way to trade the news. There are several ways and some are as follows:
MARKET SENTIMENT TRADING.
The mood of the market is simply referred to as market sentiment. This mood is generated by sustainable news releases in the past couple of hours to probably a month ago. The huge impact of the news release is enough to drive the market prices for a month and at times for up to three months. These news reports are usually Central Bank Statements,Speeches, Press Conferences, Testimonies, Interventions, etc. where major decisions affecting the economies of various countries are taken.These decisions could range from Interest Rate cut or hike, announcement of QE Program ( Quantitative Easing), Economic Out look Forecasts, Devaluation of Currencies, etc. And each of these decisions will have a lasting impact on the currency of that particular country for a very long time, thereby creating the mood of the market.
This mood gives the experienced forex trader the opportunity to place trades and hold such positions for a long time. That is why such orders are called POSITION TRADING. Unlike the conventional news trading that lasts for a few minutes to a couple of hours.
PRE-NEWS TRADING:
This form of trading is only related to the expected news report. The way and manner investors are reacting to the consensus figures being expected from an upcoming news event. For example: If the consensus figure by the economists surveyed is put at 120k new jobs to be created by the US in the past one month, and the previous month saw the creation of 220k jobs, forex investors will like to believe most of the time that since the US is about to add just only 120k jobs, the difference between the two months is 100k and this will be enough to create the impression that the US Dollar will weaken against major currencies and investors would like to sell the US Dollar ahead of the news release in anticipation of less jobs created in the past one month. This method of forex trading is simply- Pre- News Trading, that is Trading Before The News.
It could be Interest Rate Decision being expected. Once majority of the analysts surveyed expect any Interest Rate hike or cut, investors will be buying the currency in anticipation of an Interest Rate hike
and conversely, selling the currency in anticipation of an Interest Rate cut. These are just two examples of how Pre- News Trading works.
REAL NEWS TRADING:
This is the real focal point of forex fundamental analysis. Some call it the "High Point", "The Numero Uno""The Real Deal" ," The Genesis", " Eye Opener" etc. These acronyms succinctly describe how important and relevant this aspect of news trading is. If you must succeed as a professional forex trader, this is the aspect of trading that will give you the cutting edge.You need to focus attention 100% of the time when considering the analysis of fundamentals as a prelude to trading the news.
Once the news hit the wires, you are on your own. The way you use it determines the out come you are likely to get. You must have prepared your trade plan well ahead of time in anticipation of the news report. The impact generated by the news release will create the volatility in the market while the element of surprise will create the MOMENTUM that determines how much longer the impact can last. So the way you are able to analyze the news report and scrutinize every detail to place a trade will be shown by the results you get. There is no universally acceptable standards on how to analyze reports and how to trade every news item. It is purely an individual thing. This is the reason
why some fail where others succeed. There is no need emphasizing the fact that if you are not knowledgeable enough in the act of forex trading, you cannot make it in forex trading. You need to study and study and study to achieve greatness in forex trading.
Do not believe the reports or adverts in the newspapers or on the internet that you can become a professional forex trader in a few minutes. They want to take your money.Some forex brokers are the most guilty of this fraud because they are interested in taking your money. Ask yourself this question, why is it that 98% of forex traders now lose their money in the latest survey? Why is there a proliferation of forex brokers and countless number of fake forex brokers? The forex market is lucrative for them because the eagerness of new forex traders to make quick money trading forex, expose them to be gullible for deceit. You must check the reviews of whatever material you want to acquire to help your trading experience, although I do not recommend any such rubbish, except the acquisition of knowledge.
One aspect of trading is never enough to make you a professional trader. You need a combination of all the key elements of news trading which is:COMPREHENSIVE NEWS TRADING. I sympathize with those who claim to be professional traders and yet concentrate their efforts in trading one aspect of news trading as a whole. Share your knowledge and you will acquire more by so doing. Share every news item or information in the social media. Sread the good news and expand your scope of knowledge. Happy trading.
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