Other economic indicators are retail sales, unemployment rate , and housing stats. The forex market typically reacts to the news release when the release fall short or exceed expectations. This scenario presents an ample opportunity, if you can exploit it. This does not come without risk as the markets can move erratically and practically act in an opposing manner to the expected.

Trading forex news releases requires knowing when the release will be made public. This can be done by following an economic calendar. An economic calendar lists all past and upcoming releases for a specified timeframe. You can also see the type of impact the release has on the market on the calendar and you can choose to see only those which are classified as high impact. The economic calendar also shows the prior release alongside the forecast for the upcoming release.

To use an economic calendar, click here. The most important news releases that bear the highest impact on the market are those referred to as macroeconomic indicators. Examples of macroeconomic indicators are production and manufacturing statistics, retail sales, the Consumer Price Index CPI , interest rates, GDP growth rates, inflation and commodity prices, and labor market statistics unemployment rate etc.

Examples of important news releases are non-farm payrolls, Core inflation values, CPI, unemployment rate, and interest rate changes by the central banks. To find out how inflation affects the forex market, click here. To learn about the effect of GDP figures on the forex market, click here. Also, learn about how central banks regulate currency strength using interest rates here. The pairs which exhibit these properties are the majors. In terms of volume traded, the currencies with the highest values are USD , EUR , GBP , JPY , CHF , AUD , CAD , and NZD.

You should monitor releases that affect these currencies. There are different approaches to trading the news. The first approach that will be examined by this post involves being ready for any direction in which the market will move. To do this, the trader typically sets stop orders, a couple of pips away from the current trading price, such that once the market moves in any of the directions, the orders will be triggered and profit is made.

Risk attached to this involves the market acting like a whipsaw, the market will trigger both stop orders and then stay in the middle. The second approach to trading the news involves hedging. Two opposite positions, with the same lot size are opened. When the market starts to move, the trader closes the losing trade, to make more profit from the winning one.

The third approach involves choosing a direction in which you think the market will go and sticking to it. A stop or market order can be placed to such an effect. Another type of approach involves identifying the market consensus. This means that the currency will strengthen, and in accordance with this the big market players will start buying the currency. This is because these big market players will start to take their profits — selling the currency, causing the fall in price.

An alternative scenario occurs when the interest rate drops, to say 4. This is because our dear institutional investors will have to adjust their positions in accordance with the new value. Inflation consumer price or producer price 4. Unemployment 5. Industrial production 6. Business sentiment surveys 7. Consumer confidence surveys 8.

Trade balance 9. Manufacturing sector surveys. Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions.

Therefore, it is important to keep on top of what the market is focusing on at the moment. According to a study by Martin D.

Evans and Richard K. Lyons published in the Journal of International Money and Finance , 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 returns generally occurs in the first or second day, but the impact does seem to linger until the fourth day. The impact on the flow of buy and sell orders, on the other hand, is still very pronounced on the third day and is observable on the fourth day.

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 breakout on the back of the news. This can be done on both a short-term basis intraday or over several days. After a weak number in September, the euro was holding its breath ahead of the October number, which was to be released to the public in November.

A pip is the smallest measure of change in a currency pair in the forex market, and since most major currency pairs are priced to four decimal places, the smallest change is that of the last decimal point. For news traders, this would have provided a great opportunity to put on a breakout trade, especially since the likelihood of a sharp move at this time was extremely high.

The chart above illustrates—with two horizontal lines forming a trading channel —the indecision and uncertainty leading up to October non-farm payroll numbers , which were released in early November. Note the increase in volatility that occurred once the numbers were released. We mentioned earlier that trading news is harder than you might think.

The primary reason is volatility. You can be making the right move but the market may simply not have the momentum to sustain the move. This chart shows activity after the same release as the one shown in Figure 2 but on a different time frame to show how difficult trading news releases can be.

On Nov. economy gained only 56, jobs. The disappointment led to an approximately pip sell-off in the dollar against the euro in the first 25 minutes after the release.

One thing you should keep in mind is that, on the back of a good number, a strong move should also see a strong extension. dollar was able to take control and push higher. Keep in mind, when the U. dollar is appreciating against the Euro. 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 barrier levels 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 types of exotic options to use to trade news releases:.

A double one-touch option has two barrier levels. Either one of the levels must be breached prior to expiration in order for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless. A double one-touch option is the perfect option to trade for news releases because it is a pure non-directional breakout play.

As long as the barrier level is breached—even if the price reverses course later—the payout is made. A one-touch option only has one barrier level, which generally makes it slightly less expensive than a double one-touch option. The same criterion holds—the payout is only made if the barrier is breached prior to expiration.

This is a good option to buy if you actually have a view on whether the number will be stronger or weaker than the market's consensus forecast. Options on currencies are a viable alternative for those who do not care to get whipsawed in the markets by undue volatility before they actually see the spot price move in their desired direction; there are different types of currency options available through a handful of forex brokers.

In this article, I will explain about some wrong impressions and beliefs that novice Forex traders have about news trading that causes them to waste lots of time and money. Trading Forex news releases is not what most people think. Yes, you should. Trading Forex news releases is nothing but wasting of time and money. I have several reasons for this. Unlike what most traders think,. If you want to find the right way of trading Forex, you must listen to real Forex traders, not those who read and rewrite articles.

Those who tell you that trading Forex news releases are the best, less risky and most profitable, are not true. Even few years ago, I signed up for a Forex signal service that was managed by a lady who introduced herself as the most professional trader who followed the Forex news releases to trade. Both herself and her husband also worked as traders and Forex market analysts for one of the most famous Forex brokers.

So, I was really curious to try her Forex signal service to see how it worked. I paid her for a couple of months, but I saw nothing but mess.

I canceled my membership, and she also shut down her website after making so much mess. The other conclusion is that most of those who introduce themselves as the best Forex traders or market analysts are crooks. Probably they can talk or write about Forex trading very well, but when it comes to real trading, they always lose. Unfortunately, the Internet is full of the articles and videos of these so-called professional traders, Forex experts and mentors who mislead people.

You cannot do it in most cases. It can be possible on the demo accounts, but it is not possible in the real world. You think a trade setup is formed on the chart after the news release, but it is not a trade setup. It is just the normal price fluctuation. You push yourself to enter the markets anyways, after the news release, whereas this is a big mistake. You must enter the markets only when there is a strong trade setup formed on the charts, not when a news is released and you think that markets must move in the direction that you think or the news release says.

Even when the news succeeds to create a strong movement and trade setup on the charts, it is impossible to get in the markets right after the news release, with the price and spread that you want. Brokers are not able to execute your orders on time and at the price that you want because markets become too volatile and spread goes too high. It becomes worse when you trade with a market maker broker because Forex news releases are great chances for them to make you lose: 6 Ways Forex Brokers Cheat You.

Trading Forex news releases is impossible through the shorter time frames and right after the news release. In most cases, the news release cannot make the markets move, and in case it can, you cannot get in the markets with proper price and spread. When the news is really strong and has a high impact, it forms strong trade setups on the longer time frames like daily and make the markets follow the trade setup for several weeks or even months.

Professional traders wait for strong trade setups on longer time frames, and they get in the markets with peace of mind and when the dust is settled after news release. Only market maker Forex brokers are able to offer fixed and low spread during the news release time because everything is under their control, even the spread.

Your profit is their loss.

Markets can be very volatile during news releases, therefore trading during these periods requires special expertise. The market reaction varies with the type of release and can present an opportunity to make money from the market.

Trading forex during news releases can be tricky and is even banned by some brokers. In this post, I go through the why, when, and how to trade forex news releases. News releases are releases made by different bodies that collect data about significant economic indicators. Examples of these indicators are gross domestic product , consumer price index, and interest rates. Other economic indicators are retail sales, unemployment rate , and housing stats.

The forex market typically reacts to the news release when the release fall short or exceed expectations. This scenario presents an ample opportunity, if you can exploit it. This does not come without risk as the markets can move erratically and practically act in an opposing manner to the expected.

Trading forex news releases requires knowing when the release will be made public. This can be done by following an economic calendar. An economic calendar lists all past and upcoming releases for a specified timeframe. You can also see the type of impact the release has on the market on the calendar and you can choose to see only those which are classified as high impact. The economic calendar also shows the prior release alongside the forecast for the upcoming release. To use an economic calendar, click here.

The most important news releases that bear the highest impact on the market are those referred to as macroeconomic indicators. Examples of macroeconomic indicators are production and manufacturing statistics, retail sales, the Consumer Price Index CPI , interest rates, GDP growth rates, inflation and commodity prices, and labor market statistics unemployment rate etc.

Examples of important news releases are non-farm payrolls, Core inflation values, CPI, unemployment rate, and interest rate changes by the central banks. To find out how inflation affects the forex market, click here. To learn about the effect of GDP figures on the forex market, click here. Also, learn about how central banks regulate currency strength using interest rates here.

The pairs which exhibit these properties are the majors. In terms of volume traded, the currencies with the highest values are USD , EUR , GBP , JPY , CHF , AUD , CAD , and NZD.

You should monitor releases that affect these currencies. There are different approaches to trading the news. The first approach that will be examined by this post involves being ready for any direction in which the market will move. To do this, the trader typically sets stop orders, a couple of pips away from the current trading price, such that once the market moves in any of the directions, the orders will be triggered and profit is made.

Risk attached to this involves the market acting like a whipsaw, the market will trigger both stop orders and then stay in the middle. The second approach to trading the news involves hedging. Two opposite positions, with the same lot size are opened. When the market starts to move, the trader closes the losing trade, to make more profit from the winning one. The third approach involves choosing a direction in which you think the market will go and sticking to it. A stop or market order can be placed to such an effect.

Another type of approach involves identifying the market consensus. This means that the currency will strengthen, and in accordance with this the big market players will start buying the currency.

This is because these big market players will start to take their profits — selling the currency, causing the fall in price. An alternative scenario occurs when the interest rate drops, to say 4. This is because our dear institutional investors will have to adjust their positions in accordance with the new value.

This will cause the price to rocket. In conclusion, trading forex news releases can yield high and quick profits as well as high and quick losses because of volatility. Extra caution must be taken when trading news releases and you must be confident of your ability to avoid painful losses.

Thank you for reading! Feel free to ask questions and comment. Do well to subscribe to our newsletter to receive updates about new posts.

Also, follow us on social media and avail yourself of the different tools available on this platform. You can also read more of our blog or join our forum. Our Recommendation NZDUSD has been trading in a range since the 27th of March.

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dollar was able to take control and push higher. This is always relative, as with the other two economic data mentioned previously, it depends on how the economy is performing against the quoted currency. In the case of Non-farm Payrolls, as mentioned before due to its importance, large deviations from the expected figure can cause large bursts in volatility. Trading Forex News Releases With at least eight major currencies available for trading at most currency brokers and more than seventeen derivatives of them, there is always some piece of economic data slated for release that traders can use to inform the positions they take. In this post, we will be examining….

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