Trading the News

Trading the News

Trading the News is the term for an elaborate strategy of predicting and following market direction based on key economic, financial, and geopolitical announcements. It is applied in virtually every financial market. For example, stock traders can load up on the shares of a company following the release of its financial statements which turn out impressive.

Also, the share price of a company can rise on the heels of the company announcing a management overhaul. Another example is the price of a commodity such as oil shooting up if the stability of one of its largest producers is being threatened. There are many instances of news trading, and you should incorporate it into your trading toolkit, too.
The categories of news that can impact the Forex market are:

·         Political News

Political news announcements are highly important to Forex traders. These important announcements largely have to do with elections and political meetings. For example, when elections are about to be held in a country, depending on the nature of its political system, such a country can be considered politically unstable, at least, in the short-term.

Consequently, traders can be pessimistic about its currency, a situation that can trigger massive sell-offs across its counter. Also, political candidates campaign on different issues. The most popular candidate being the one with the most attractive economic policies can result in investors being optimistic about the currency of that country.

In 2016, for example, the defining political issues of the year were the Brexit Referendum and Donald Trump and Emmanuel Macron elections. Those events dictated many significant happenings in financial markets that year.

·         Economic Announcements
Economic news announcements move financial markets to a very large extent. Fundamental analysts seek to analyze those economic factors that do. They analyze economic releases made by government and private sector agencies. They use those releases to evaluate the economies of nations and to forecast their directions.

These data include unemployment rate, inflation, interest rates, Purchasing Managers' Index (PMI), home and retail sales, crude oil inventories, and GDP. ForexSignal traders analyze all these factors holistically to assess the performance of a country's economy. For example, when the GDP and inflation are contracting and the country's apex bank announces a rate cut, the currency of that country can become less desirable.

To be trading economic news, you will have to incorporate an economic calendar into your toolkit. However, before you start using it, you should ensure that it is in your local time. Also, you should reconfigure it to highlight only the news that affects the currencies or assets you will be following. Trading economic news should not be considered easy. You need to master the basic effects of specific economic factors before you will be able to reap any gains with it.

·         Disaster, War, and Speech

News of disastrous occurrences, impending wars, and speeches delivered or to be delivered by policymakers also do have substantial effects on financial markets. For example, early this month, the killingof an Iranian General, QasemSoleimani, sparked fears of war, eventually resulting in a jump in oil price.

Now, the news is that if the on-going anti-government protests in Iran eventually topple the regime, U.S. sanctions will be ultimately lifted, and that can flood the market with Iranian oil. If this plays out, there is the possibility of oil dropping to as low as $40 before the end of the year. Additionally, speeches of presidents, central bank governors, and senior government officials can impact traders' perceptions of the values of currencies, resulting in price rise or fall.

Finally, adopting an effective news trading strategy will ultimately pay off a lot. However, you might want to indirectly adopt one by using a signal service based on it. For that, 1000pip Builder is there. They give you the best of the two worlds of both news and technical trading. You should subscribe to their service here.