{"id":9822,"date":"2022-10-14T05:29:26","date_gmt":"2022-10-14T05:29:26","guid":{"rendered":"https:\/\/mdr.foobrdigital.com\/?p=9822"},"modified":"2022-10-14T05:29:26","modified_gmt":"2022-10-14T05:29:26","slug":"how-to-trade-forex-on-news-releases","status":"publish","type":"post","link":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/2022\/10\/14\/how-to-trade-forex-on-news-releases\/","title":{"rendered":"How to Trade Forex on News Releases"},"content":{"rendered":"\n<p>Before developing a \u2018Trade the News\u201d strategy, we have to look at&nbsp;<strong>which news events are even worth trading<\/strong>.<\/p>\n\n\n\n<p>You want to be able to answer, \u201c<em>Which news releases should I trade?<\/em>\u201d<\/p>\n\n\n\n<p>Forex traders should&nbsp;familiarize themselves with the&nbsp;<strong>key event risks that heavily impact the major currencies<\/strong>.<\/p>\n\n\n\n<p>Remember that we are trading the news because of its ability to&nbsp;<strong>increase volatility in the short term<\/strong>, so naturally, we would like to only trade news that has the&nbsp;<strong>best market-moving potential for the currency market<\/strong>.<\/p>\n\n\n\n<p>The news that tends to drive price action and produce volatility usually involves:<\/p>\n\n\n\n<ul><li>Changes in&nbsp;<strong>central bank policy<\/strong>&nbsp;(\u201cmonetary policy\u201d)<\/li><li>Shifts in&nbsp;<strong>government policy&nbsp;<\/strong>(\u201cfiscal policy<strong>\u201c)<\/strong><\/li><li>Unexpected results in<strong>&nbsp;economic data releases<\/strong><\/li><li>Random&nbsp;<strong>tweets<\/strong>&nbsp;from a certain world leader who likes to put his name on tall buildings<\/li><\/ul>\n\n\n\n<p>Being aware of upcoming key event risks can help avoid&nbsp;<strong>being on the wrong side of the market<\/strong>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to Find Events that Produce Volatility<\/h2>\n\n\n\n<p>The BabyPips.com\u00a0Economic Calendar\u00a0highlights the important events and economic data that are being released by the countries with the most popularly traded currencies.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><a href=\"https:\/\/www.babypips.com\/economic-calendar\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2010\/11\/26134344\/babypips-economic-calendar-780x587.png\" alt=\"Economic Calendar\" class=\"wp-image-174988\"\/><\/a><\/figure>\n\n\n\n<p>The number of events scheduled can reach over a hundred on any given week! Trying to sift through so many events can be a pain in the butt.<\/p>\n\n\n\n<p>Luckily for you, our&nbsp;<strong>Economic Calendar<\/strong>&nbsp;makes it easy to identify the relative importance of each specific event.<\/p>\n\n\n\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2010\/11\/26134627\/babypips-economic-calendar-filter-by-impact-780x587.png\" alt=\"Economic Calendar Filter by Impact\" class=\"wp-image-174990\"\/><\/figure>\n\n\n\n<p>In our Economic Calendar, you have the ability to filter event listings by \u201c<strong>Impact<\/strong>\u201c.<\/p>\n\n\n\n<p>For example, by selecting only \u201c<strong>HIGH<\/strong>\u201c, the Economic Calendar will only display the events that have historically been known to produce market volatility.&nbsp;<\/p>\n\n\n\n<p>If you spend some time exploring the Economic Calendar, you\u2019ll start to notice that the most important events usually relate to changes in interest rates, inflation, and economic growth, like retail sales, manufacturing, and consumer sentiment.<\/p>\n\n\n\n<p>Here are some examples:<\/p>\n\n\n\n<ul><li><strong>Interest rate decisions<\/strong>&nbsp;by central banks<\/li><li><strong>Inflation<\/strong>&nbsp;(CPI, PCE, PPI)<\/li><li><strong>Employment data<\/strong>&nbsp;(unemployment, wage growth)<\/li><li><strong>Economic growth<\/strong>&nbsp;(GDP)<\/li><li><strong>Retail sales&nbsp;<\/strong><\/li><li><strong>Industrial production<\/strong><\/li><li><strong>Business sentiment<\/strong>&nbsp;surveys<\/li><li><strong>Manufacturing sector<\/strong>&nbsp;surveys<\/li><li><strong>Consumer confidence<\/strong>&nbsp;surveys<\/li><li><strong>Housing data<\/strong>&nbsp;(sales, construction)<\/li><li><strong>Trade balance<\/strong><\/li><\/ul>\n\n\n\n<p>Different countries may use different names for similar data but we try to point that out in the Economic Calendar.<\/p>\n\n\n\n<p><strong>Depending on what\u2019s currently happening in the world, the relative importance of this event may change.&nbsp;<\/strong><\/p>\n\n\n\n<p>For example, interest rate decisions may be the main focus during a certain time, while during a different time, it will seem like nobody cares.<\/p>\n\n\n\n<p><strong>This is why it\u2019s important to stay informed and know what the market is focusing on at the moment.<\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Pay Special Attention to News from the U.S.<\/h2>\n\n\n\n<p>While the markets react to most economic news from various countries, the biggest movers and most watched news come from the&nbsp;<strong>U.S<\/strong>.<\/p>\n\n\n\n<p>The United States is still considered the world\u2019s most powerful country,&nbsp; whether it\u2019s in the domain of military affairs, geopolitics, industry, energy, science, culture, and technology.<\/p>\n\n\n\n<p>It is even described as a \u201cfinancial superpower.\u201d<\/p>\n\n\n\n<p>Even if its position has been eroded by setbacks, imbalances, and weaknesses, the strength and influence of the US dollar will not be matched anytime soon.<\/p>\n\n\n\n<p>The United States still has the largest economy in the world and the&nbsp;<strong>U.S. dollar is the world\u2019s reserve currency<\/strong>.<\/p>\n\n\n\n<p>This means that the U.S. dollar is a participant in about 90% of all forex transactions, which makes U.S. news and data important to watch.<\/p>\n\n\n\n<p>With that said, let\u2019s take a look at some of the most volatile news for the U.S.<\/p>\n\n\n\n<figure class=\"wp-block-image aligncenter\"><a href=\"https:\/\/bpcdn.co\/images\/2016\/05\/freshman-most-volatile-news-reports2.png\"><img decoding=\"async\" src=\"https:\/\/bpcdn.co\/images\/2016\/05\/freshman-most-volatile-news-reports2.png\" alt=\"Most volatile news reports in the forex market\" title=\"Most volatile news reports in the forex market\"\/><\/a><\/figure>\n\n\n\n<p>In addition to inflation reports and central bank speeches, you should also pay attention to&nbsp;<strong>geopolitical news<\/strong>&nbsp;such as<\/p>\n\n\n\n<ul><li>Pandemics<\/li><li>Wars<\/li><li>Natural disasters<\/li><li>Political unrest and protests<\/li><li>Upcoming elections<\/li><\/ul>\n\n\n\n<p>Although these may not have as big an impact as the other news, it\u2019s still worth paying attention to them.<\/p>\n\n\n\n<p>When our economic nerd,\u00a0Pippo, is in a good mood, he usually releases an article on upcoming news reports that you can play and with trade strategies to boot!<\/p>\n\n\n\n<p>Also, keep an eye on moves in the&nbsp;<strong>stock market<\/strong>. Especially the U.S. stock market.<\/p>\n\n\n\n<p>There are times when&nbsp;<strong>sentiment in the equity markets will be the precursor to major moves in the currency market<\/strong>.<\/p>\n\n\n\n<p>Now that we know which news events make the most moves, our next step is to determine which currency pairs are worth trading.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to Choose Currency Pairs to Trade the News<\/h2>\n\n\n\n<p>After identifying the event to monitor, you now want to trade&nbsp;<strong>the currency associated with that event\u2019s economy<\/strong>.<\/p>\n\n\n\n<p>Choosing the appropriate currency pair is an important decision when \u201cTrading the News\u201d.<\/p>\n\n\n\n<p>As a news trader, you are trying to achieve two things:<\/p>\n\n\n\n<ol><li>Take advantage of the short-term spike in volatility\u2026<\/li><li>While keeping your transaction costs as low as possible<\/li><\/ol>\n\n\n\n<p>Because news can bring increased volatility in the forex market (and more trading opportunities), it is important that we trade currencies that are&nbsp;<strong>deeply liquid.<\/strong><\/p>\n\n\n\n<p><strong>Currencies with deep liquidity have the tightest spreads&nbsp;<\/strong>which are what allow you to keep your transaction costs low.<\/p>\n\n\n\n<p><strong>Liquid<\/strong>&nbsp;currency pairs give us reassurance that our orders will be executed smoothly and without any \u201chiccups\u201d.<\/p>\n\n\n\n<ol><li>EUR\/USD<\/li><li>GBP\/USD<\/li><li>USD\/JPY<\/li><li>USD\/CHF<\/li><li>USD\/CAD<\/li><li>AUD\/USD<\/li><\/ol>\n\n\n\n<p>Did you notice anything here?<\/p>\n\n\n\n<p>That\u2019s right! These are all&nbsp;<strong>major currency pairs<\/strong>!<\/p>\n\n\n\n<p>Remember, because they have the most liquidity, major pairs usually have the tightest spreads.<\/p>\n\n\n\n<p>Since spreads&nbsp;<em>widen<\/em>&nbsp;when news reports come out, it makes sense to stick with those pairs that have the tightest spreads, to begin with.<\/p>\n\n\n\n<p>Now that we know which news events and currency pairs to trade, let\u2019s take a look at some approaches to trading the news.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Before developing a \u2018Trade the News\u201d strategy, we have to look at&nbsp;which news events are even worth trading. You want to be able to answer, \u201cWhich news releases should I trade?\u201d Forex traders should&nbsp;familiarize themselves with the&nbsp;key event risks that heavily impact the major currencies. Remember that we are trading the news because of its [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[818],"tags":[],"_links":{"self":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9822"}],"collection":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/comments?post=9822"}],"version-history":[{"count":0,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/posts\/9822\/revisions"}],"wp:attachment":[{"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/media?parent=9822"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/categories?post=9822"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mudassirbackup.infinitycodestudio.com\/index.php\/wp-json\/wp\/v2\/tags?post=9822"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}