Currency News Trading for experienced forex traders is a challenging way for them to exploit fast moves within the forex currency market.
Traders whom have a robust trading strategy suited to take advantage
of these fast news moves spend time trading the markets around the time of news announcements. Many have their trading systems coded into Metatrader for automatic trade execution. What they do is wait for an
appropriate upcoming news announcement, log-into their forex account
just before the news release and then buy or sell the currency for an
extremely short period of time. Anything from seconds or minutes in duration. Many employ their semi-automated trading systems to close out trades after they have opened them manually.
It's not as easy as it sounds or everybody would be doing it. It
is definitely not something beginner traders should do without lots of
practice on a demo account and a good trading plan and strategy.
Forex traders wanting to trade the news need to obtain the right training as well as a lightening fast news feed service. (See bottom of page for a recommended service). A non-market maker broker is also recommended. A broker whom does not profit from a traders losing trades. Refer broker list here.
Many market makers (whom take the opposite side of traders positions) will not allow or tolerate extremely short term scalping practices. They beat the scalper by dramatically increasing spreads around news times and employing re-quotes at delayed prices. Non market makers with no dealing desk ECN execution style setups are the brokers of choice for this type of trading.
The specific's behind trading the news
The concept behind trading the news is to select a "high impact" news
release such as Retail Sales, Unemployment, Durable Goods, Non Farm
Payrolls etc that shows the strength or weakness of a country's economy.
Note the Financial Market Analysts expectations for their estimated (or guessed) figures relating to the news announcement. The market will have factored in their expectations already based on 'their expectations'.
the actual results come out for the news announcement, data sources
like the Federal Reserve, Bureau of Economic Analysis, Bureau of Labor
Statistics or Conference Board will tabulate the ACTUAL Accurate results
for the data figures revealed in the news announcement.
THERE IS A BIG DIFFERENCE OR DEVIATION between the Market Analysts
Expectations and the Actual Results then this will create the forex
currency impacted by it to make a big move to correct its value to a
more suitable level and hence, the news trader ready to profit from the
Better than expected financial data results will have
the news trader buying the currency as the positive results mean the
economy is in a better condition than thought and hence it's currency
will move higher.
While, the inverse is true for a worse than
expected news announcement. The currency needs to depreciate in value as
the countries economy is in worse condition than thought and hence the
news trader will SHORT the currency or SELL it for short term profit.
How long does news announcement impact market?
Many news traders count on entering the market the second the news announcement is made public.
It's been said that traders whom are set up with the fastest
information and data feeds are ahead of other traders and can
consistency make short term profits.
A currency news trader by the name of Brenda says some of her
trades have included staying in the market for only 26 seconds and
making 85 pips profit. And 31 pips profit from a 1 minute long trade.
According to a study by Martin D. D. Evans and Richard K. Lyons
published in the Journal of International Money and Finance (2004), the
market could still be absorbing or reacting to news releases hours, if
not days, after it's released. The study found that the effect generally
occurs in the first or second day, but the impact does seem to linger
until the fourth day. The impact on order flow, on the other hand, is
still very pronounced on the third day and is still observable on the
Catch up with the latest forex news here.
Traders looking for a reliable world class news feed
May like to consider Ransquawk, who is said to be the World Leader in 24Hr live coverage real time, market moving audio financial news and instant analysis on important news as it happens. Used by 8/10 of the world's largest banks.
They provide instant coverage of Equities, Fixed Income, Energy, Metals & Forex.
Recent example; News SNB call an end to their minimum exchange rate and also lower interest rate to -0.75%. 2015-01-15 09:30 GMT
Reaction EUR/CHF immediately fell 970 pips from the 1.2000 level before falling a total of 3,482 in the following 19 minutes after the first squawk was delivered.