{"id":75772,"date":"2024-01-17T17:00:00","date_gmt":"2024-01-17T15:00:00","guid":{"rendered":"https:\/\/ironfx-com-php8.wp-dev.int.theitops.net\/?p=75772"},"modified":"2024-01-15T12:26:42","modified_gmt":"2024-01-15T10:26:42","slug":"news-trading-strategies-how-to-trade-the-news","status":"publish","type":"post","link":"https:\/\/www.ironfx-cn.com\/es\/news-trading-strategies-how-to-trade-the-news\/","title":{"rendered":"News Trading Strategies \u2013 How to Trade the News"},"content":{"rendered":"

There are many ways to trade in the forex market, and one of these is news trading<\/strong>. Trading on the news is a strategy whereby traders speculate on price movements that arise due to economic, political, or environmental events. These events can range from central bank announcements to inflation increases, employment rates, investor sentiment, geopolitical tensions, war, and natural disasters.<\/p>\n\n\n\n

In this article, we will explore news trading, its impact on the forex market<\/a>, key tools, and more.<\/p>\n\n\n\n

Why trade the news?<\/strong><\/h2>\n\n\n\n

Traders choose to trade the news for different reasons, but the biggest reason is volatility, as they can potentially maximize profits on rapid price movements.\u00a0\u2018News\u2019 refers to economic data releases such as GDP and inflation, and forex traders tend to monitor such releases considered to be of \u2018high importance\u2019. The news that tends to drive price action and produce volatility usually involves changes in central bank policy (monetary policy), shifts in government policy (fiscal policy), and unexpected results in economic data releases<\/a>.<\/p>\n\n\n\n

The biggest movements tend to follow a \u2018surprise\u2019 in the data, meaning that the actual data differs from the market\u2019s expectations. Furthermore, news releases are set at predetermined dates and times, giving traders enough time to plan a winning strategy<\/a>. Traders that can effectively manage the risks of volatility at the predetermined time of the news release are well on their way to becoming consistent traders.<\/p>\n\n\n\n

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The impact of major news releases on the forex market<\/strong><\/h2>\n\n\n\n

Right before a major news release, it is usual to observe lower trading volumes, lower liquidity, and\u00a0higher spreads, which often result in big price jumps.\u00a0This is\u00a0because\u00a0large liquidity providers, much like retail traders,\u00a0do not know the outcome of news events before their release\u00a0and\u00a0seek to balance some of this\u00a0risk by widening spreads.\u00a0Large price movements can make trading major news releases exciting, but it can also be risky. Due to the lack of liquidity, traders may encounter unpredictable price movements, which could lead to a sharp price spike that could jump past a stop loss and cause slippage.<\/p>\n\n\n\n

Moreover, the wider spread could trigger a margin call if there isn\u2019t enough free margin to cover this. The challenges surrounding major news releases could result in a short trading career if not managed properly through careful money management, such as incorporating stop losses or guaranteed stop losses (where available).<\/p>\n\n\n\n

Major currency pairs typically have lower spreads than the less traded emerging market currencies and minor currency pairs. Therefore, traders may consider trading the majors, which include EUR\/USD<\/a>, USD\/JPY, GBP\/USD<\/a>, AUD\/USD, and USD\/CAD, to name a few.<\/p>\n\n\n\n

Traders must plan and have a clear understanding of the events they want to trade as well as when they occur. It\u2019s also important to have a solid trading plan in place.<\/p>\n\n\n\n

Which major forex news releases are to be traded?<\/strong><\/h2>\n\n\n\n

When learning how to trade news, traders need to be aware of the major news events that can impact the forex market<\/a>. An economic calendar can be used to monitor major news events closely. US economic data is widely considered the most significant news because it influences the global currency markets. It is important to remember that not all news releases lead to increased volatility. Instead, there are a select number of major news releases that have historically had the greatest potential to move the market.<\/p>\n\n\n\n

The major US economic releases include non-farm payrolls (NFP), US gross domestic product (GDP), and the US Federal Reserve bank rate. Other important non-US data releases from around the world include the European Central Bank refinancing rate and the Bank of England official bank rate.<\/p>\n\n\n\n

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Key tools and resources for trading the news with IronFX<\/strong><\/h2>\n\n\n\n