This article covers the benefits and pitfalls of trading forex news as an effective strategy.
There are a range of forex trading strategies that you can utilise. You should ensure that the one you choose is suitable for your trading style and that you feel comfortable using it. Most importantly, you must know exactly how the strategy should be implemented and when to adjust it. Forex news trading is one of the strategies that are used by many. It is not an easy strategy to implement if you do not have experience in forex, but it can bring positive results.
Benefits of Forex News Trading
The main advantage linked to this strategy is that it is easy to understand. The fluctuations in the forex market are brought about by the changes in the currency values of different currencies. These swings in currencies are often affected by news releases in the market. The main events that affect this market are political, social and economic events. It is possible to predict the swing in currency by watching news releases on a regular basis.
This method of trading requires a certain level of skill in the market. The risks attached to this type of trading are quite high, but so are the rewards. Being alert and among the first to spot a possible trend based on a news release gives you the opportunity to purchase currencies before the rush commences.
Another advantage is that the news is available to all. You can set up news flashes for the currencies you are interested in and any news related to that country will be sent to you online. The news related to forex can be found on news websites, on your forex broker’s website and via social media. The one main consideration you should make is to ensure that the news is current and up to date.
Pitfalls of Forex News Trading
The main problem with this method is having the capacity to sort through the news and eliminating that which is irrelevant. There are many stories that appear to be relevant to the market, but are not, simply because the final release may not affect the country’s currency. You should focus on news releases that will have an impact on the country’s economy.
One of the problems with this strategy is the sheer number of news releases on a daily basis. Having to find the time to go through all these is too much for most traders, particularly those who are new to the trading arena. You will eventually learn to sift through the relevant and irrelevant news pieces to find the ones that will have a massive impact on the currency you are trading.
Another problem is that you may receive the news release too late for you to action it. Professional traders and the large financial institutes are normally first in line when it comes to receiving relevant news releases. They receive the news announcement before it is made public. This gives them the change to take advantage of potential trends and by the time you receive the news, the most profitable time for trading the currency may have passed.
You need time to implement this strategy and awareness of the world around you. Keep up to date with news events; maintain an efficient forex calendar and you could benefit from this strategy. You must bear in mind the time that is required for this trading strategy and plan for it.