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.
