Jun 28 2009
Learn
forex scalping.Currency markets react violently to the release of fundamental economic news like the release of the NFP figures, the housing sales figures, the GDP figures or other socioeconomic and political news. Volatility is what makes currency markets so attractive to so many traders.
Develop your own
forex trading system.One of the popular methods of trading currencies is to trade news releases. This type of trading strategy is intriguing to many traders as it provides the possibility of instant gratification. You lay on the trade minutes before the news release. Your heart pumps when the clock ticks within 60 seconds of the number coming out.
Get good
forex training.When the news does come out, either you feel an instant sense of elation, a trading high that you had the right instincts or an instant sense of frustration when the market behaves in a totally unpredictable fashion. News trading is great for those traders who like a lot of action within a short period of time.
When an economic number deviates significantly from the consensus forecast, there is usually a knee jerk reaction in the markets accompanied by a decent follow through. This is the basis of news trading. News trading if done incorrectly can lead to more losers than winners. So you have to be careful. There are many ways to trade the news.
Attempting to capture the volatility in the currency markets created by a news release is what trading the news means. This volatility in the currency prices creates the breakout trade as the price action smashes through the support or resistance. You must note that a news trade is not a trade that is placed just before the news is released or is placed just after the news is released.
Many traders follow the adage, “Buy the rumor and sell on the news”. Many traders trade the news. You must know news trading is a risky business. There are several forms of risks unique to news trading. You should understand the risks involved in news trading. [spin]
[spin]Many brokers charge more for a trade just after news is released. The spread charged by the brokers may jump to 15 pips from 3-4 pips right after the release of the NFP Figures.
Most brokers find it difficult to enter your order just right after a news release as they are flooded by thousands of orders in just a few seconds. This means that your order may take longer to process and your trade could be entered many pips away from where you had wanted.
The stop order placed by you needs to be touched by the price before it’s triggered. However, sometimes after the release of fundamental news, the markets can become highly volatile and jump several pips all of a sudden.
For example on the EUR/USD currency pair, all of a sudden on the release of the news the price may suddenly jump from 1.3249 to 1.3255. Suppose you had the stop loss order placed at 1.3250. The price jumped from 1.3249 to 1.325 without ever touching 1.3250 price levels.
Your stop loss order was not triggered. The price never touched 1.3250. You did not get stopped out. You are still in the market. You are exposed to potentially unlimited losses.
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