The decision regarding your choice of trading strategy may become complicated, but you should bear in mind that it has to suit your trading style and you should feel comfortable implementing it. An important factor is to know when to use it and when to amend it. Many traders make use of forex news trading strategies. This strategy offers positive results, however it is not simple to use unless you have the relevant forex experience to use with it.
Advantages of Trading Forex News
The strategy is easy to understand. The movement swings in the market are pushed by the changes in value of the different currencies. The movements that occur are often prompted by news announcements and releases related to the financial markets. The main factors that affect this financial market are political events, social events and economic movements. By keeping abreast of all the relevant announcements and news releases, you should be able to effectively predict currency value movements.
To use this method of prediction effectively, you need to have some experience in the forex market. The risk level of this method is high, but at the same time that means that the rewards are equally high. If you keep abreast of news events, you will be able to spot a trend as soon as a news announcement is released. This will put you in an advantageous position as you will be able to place trades before the rush commences.
The news you need to keep up to date with is available to everyone. You could set up alerts related to the news flashes linked to your specific currencies. These news releases are normally available on news site, social media sites and your forex broker’s website. You should ensure that you are not reading outdated news and that it is up to date and current.
Disadvantages of Trading Forex News
A lot of time is required to sift through all the daily news announcements and get rid of the ones that do not apply. You may see hundreds of stories that appear to be relevant, however most of it is not important at all because it may have an effect on currencies. You should place emphasis on the announcements that are more likely to affect a country’s currency value.
The reason why it is said that you require experience in the forex market to effectively trade forex news is because of the sheer volume of news releases. You need to have the time to locate the news and the knowledge to know whether it is relevant to the currency market or not. Newcomers to forex may become overwhelmed by the volume and the confusion it may cause as to the relevance to currencies. This could cause them to act impulsively and trade without considering the impact of the news.
One of the disadvantages of this strategy is that you may miss or not see the news at all, or you may receive it too late to take action. To effectively maintain this strategy, you should maintain a forex calendar as a reminder for the date and time of the relevant news releases.