News trading is a useful weapon when doing currency trading. To some, this is the only the tool they need to become successful with their forex tradin...
News trading is a useful weapon when doing currency trading. To some, this is the only the tool they need to become successful with their forex trading career. This is due to the fact that news releases on countries economies commonly result into short term movements that forex traders take as an opportunity for great trading. It is very likely that a breakout trader would be able to catch the volatility of the market if he is diligent with his news trading.
How does a trader know which news to look out for? The usual news reports that causes market movement are those that pertains to interest rate decisions, employment growth, gross domestic product (GDP), trade balance, durable goods, retail sales, foreign purchases report (TIC Data) and inflation reports (Producer Price Index and Consumer Price Index).
News trading employs two methods, straddles and "Trading the Numbers". The first one is the riskier method of trading the news but requires not much thinking and is easier to set up. What is done with the straddles method is the forex trader puts a limit order that would result to a few pips long above market before the release of a news report. At the same time, the forex trader also puts in a limit order to get a result of a few pips sort below the market. If the released news reports creates the expected volatility, the orders are triggered and the profit level as well as the stops are executed if hit.
The second method, "Trading the Numbers" is more popular to traders because it is less risky than the first one. The forex trader is able to know if the released news report is worth trading. Not all news releases are useful in currency trading and some may not be able to create any movement I n the forex market. The good thing about this is the trader determines this beforehand and he may choose which news report would be useful or dangerous in trading.
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