Currency News Trading
Currency News Trading for experienced forex traders is a great way for them to exploit fast moves within the forex currency market.
Update at 23 November 2011
Two traders Nelson Anderson and David Norris have just released to the public
which enables even novice traders to trade the news.
They have created a membership site which includes a continued monthly educational aspect whereby they provide entry and exit signals as well as automated forex news trading software called the Spike Trader Pro. Brainyforex has done a little review here.
Traders whom have a robust trading strategy suited to take advantage of these fast news moves do extremely well. 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. Some news traders open and close positions within a matter of seconds.
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.
Forex traders wanting to trade the news need to obtain the right training as well as a lightening fast news feed service.
How Currency News Trading Works
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'.
Once 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.
IF 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 move.
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 noted 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 fourth day.
Catch up with the latest forex news here.
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