HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
MultiBank Group information and reviews
MultiBank Group
84%

Trading on the news: Pros and Cons


Most often, the most significant changes in the Forex market occur after the financial, economic and political news and the reaction of the market to them. Trading on fundamental news is one of the strategies most sought after. A lot of news is published every day and many traders use it their main trading strategy.

Traders treat in this way of trading differently. Some of them say that the release of news is a great opportunity to increase their income, while others advise to refrain from any trade during major news publication.

Trading on the news is not so easy. It is important to have not only good knowledge of theory, but also practice in the field of macroeconomics. Traders whose trading is not just a hobby, but the main job, devote maximum time to the news. A correctly chosen trading strategy largely depends on the market data. It is these data that help to trade and at the same time be in the black, and not "drain" your entire deposit.

How to track news and make predictions


You can make predictions for the news using two main tools, namely: a special news indicator and an economic calendar.

Practice shows that a profitable strategy can be created on any news. News is conditionally divided into six main blocks. And the most important and most demanded block is the one which contains important events of the world economy. These include:

You can track economic events directly on the website of your Forex broker. Most often, brokers provide their clients with an economic calendar that contains a complete list of events, reports, their importance and release date. Also, in the calendar you can find data on a particular news for the past period, forecast, and its final result after the news release.

When trading on the news, you should give preference only to what is planned, which is already on the calendar, because this kind of news can give a predicted market reaction, which increases the chances of successful trading. News, the appearance of which no one expected can be highly volatile. Preparing for such news to calculate everything for a successful transaction is difficult, which leaves little chance of success.

Two main approaches to Forex trading


The first approach is an attempt to make a forecast not only on the news, but also on how the market will respond to it. This strategy involves placing pending orders to buy or sell in the estimated direction of the price. The market is moving fast on the news, at this time it is characterized by sharp price spikes in one direction or another. Manual control of open transactions, in this case, becomes problematic. Therefore, Stop Loss and Take Profit protective orders are an integral part of this strategy. These orders can save your deposit in the event of failure, and will provide you with a stable income if fortune smiles at you.

An experienced trader places orders simultaneously in two directions, placing a bet on the purchase and sale of an asset. When trading two orders at once, we also cannot do without Stop Loss and Take Profit, and their importance here is much higher, since one of the transactions will definitely be unprofitable. Such a strategy is rather risky and its use is justified only if all risks are taken into account and reinsured.

According to the first strategy, traders place orders in the region of 50 points from the price 10 minutes before the news, using stop loss and take profit orders. We consider this tactic to be too risky. Firstly, brokers often increase the spread before the news, and the market becomes unstable, especially before the big news.

Here a trader can win only if the price goes in the direction he has chosen, if it jumps up and down, then a traders has every chance to fly out of the market in the red.

The second way is to show patience, wait for the news to come out, wait for the reaction of the market and only then make your move. This trading method is based on the so-called momentum dispersion effect after the first reaction of traders to the news. There is no need to puzzle where the price moves, you just go with the flow, using what you see. Wait for the reaction of the market, and then act on the situation.

Choosing this option, you should not try to start trading before the release of the report you expect, and, moreover, you do not need to enter the market immediately after the first reaction of traders in the market. Soberly assess the situation, and only then do your move. The main thing that you should worry about is whether the mood of the market changes after the release of the data or the trading remains in the same direction.

To understand whether the price movement was true or false - you need to wait until it closes above or below the nearest level. The ideal timeframe for this type of trading is 5-15 minutes charts. We believe that such a strategy is most suitable for novice traders.

Whatever strategy you choose - remember that before you start trading with real money you need to try everything on a demo account. Having received a positive result on a demo account, you can switch to a real one, but start with a small amount of money.


Pros and cons of trading on the news

Such a strategy also has disadvantages.

Conclusion


To summarize, we want to say that despite the apparent simplicity, trading on the news is a complicated business, requiring not only knowledge, but also endurance. The trader needs to take into account many variables, such as the previous index value, the forecast for the news, conversations and gossip that came out on the eve of the release.

The investor needs to find the nearest levels to which the price can move in case of a positive outcome or a negative one. During the release of the news itself, you need to be as calm as possible and not succumb to emotional impulses. Yes, all this is difficult, but the reward is considerable. Just one good piece of news can replace the profit from a dozen ordinary daily transactions.

Author: Kate Solano for Forex-Ratings.com

RELATED

How to Amplify Earning With Margin Trading?

Leverage is the practice of using an amount of debt or borrowed capital to take a position in an investment, finance a project, or fund a business and...

Decreasing the Exchange Spread: What Does it Mean for Traders?

When you first start looking for potential Forex brokers, you might notice that some of them take commissions for executing every trade while others claim to offer zero-commission services...

Deep Dive into the Crypto Lexicon: NGMI vs WAGMI

The world of cryptocurrency is not just about trading and investing; it's also about a culture that has its unique language. Terms like HODL, which is shorthand...

Mastering the Weekly Time Frame in Forex Trading

The world of forex trading is replete with various time frames that traders can employ to gauge market direction and volatility. One of the most significant among these is the weekly time frame...

EOS: Where Will 2021 Take This Coin?

If you've considered adding cryptocurrencies to your trading strategy or investment portfolio, you've likely come across EOS. Is this altcoin worth your while?

Cryptocurrency Volatility at Forex

There's no doubt that cryptocurrency volatility has helped some people to grow their wealth in a very short time frame. It is equally...

What is Decentralized Finance, or DeFi?

Decentralized finance, or DeFi, is similar to but not identical to Bitcoin (BTC). The term "DeFi" refers to financial systems enabled by decentralized blockchain technology. DeFi is mostly linked to the Ethereum (ETH) blockchain...

Monero: New All-Time High Coming?

Monero has seen significant gains over the past few months, more than doubling in price. However, there is room for growth - at the very least, to its all-time high of $495.84...

Unlocking The Power Of Correlation In Forex Trading

Correlation plays a crucial role in forex trading, providing valuable insights into the relationship between currency pairs. By understanding and analyzing correlations...

Standard & Poor's Rating: What It Shows And Why Investors Need It

Credit ratings help investors categorize issuers of stocks, bonds, or entire nations by their level of debt risk. Depending on the level of credit rating assigned, you can understand the level of credit risk...

Does the Stock Market Reflect the Real Economy?

The stock market has often been regarded as an indicator or predictor of the real economy. Its suggested that a large downward movement in the stock market (20% and below) is telling of a future recession...

Benefits of Becoming a Signal Provider for Copy Trading

As a trader, you may be asking yourself if becoming a signal provider is right for you. Many new traders turn to copy trading as a way to learn from more...

Small-caps and large-caps. What’s the difference for those who buy them?

Shorthand for "market capitalization", the term market cap refers to the total value of all a company’s shares of stock. One can calculate it by multiplying...

Complete Guide to precious metals trading

Both Gold and Silver are considered valuable metals and have been chosen by various clients for years now. Nowadays, precious metals trading...

Options vs Stocks: Differences, Similarities, and Which to Choose

Stocks and options both involve dealing with company shares and equities, but are two different ways of investing. Between the two, stocks are more straightforward and easier to understand...

Advantages of Forex vs. Stocks

The Forex market is the largest financial market in the world, with an average daily turnover of more than $5 trillion. That's more than the stock...

Crypto winter has arrived: why crypto CFDs might be a good option to consider now?

Alarming articles about the "new crypto winter," i.e., multi-month bear market for Bitcoin (BTC) and major altcoins are popping up here and there...

Short Selling vs. Puts: An In-depth Analysis of Market-Contrarian Strategies

Navigating the intricate landscape of the stock market can be overwhelming for newcomers. Amidst a sea of financial jargon, you may have come across terms like "short selling" and "puts" without a clear understanding...

Steps on how to trade Cryptocurrency in 2020

Every country has its own paper or fiat currency which is usually printed and controlled by the national or central bank. This is why forex transactions are important...

Exchange Traded Funds (ETF) - Meaning, Types, Benefits

ETF funds may become a good alternative to stocks for those who have just turned their attention to earning on the stock market. We have decided to find out what ETFs are worth choosing...

XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
Octa information and reviews
Octa
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.