Trading the News
By: Kirk Norwood
There are really a few ways to know whether to open a position. Analyzing the news is one of them. Staying updated on current events is of utmost importance when it comes to trading Forex, but no matter how long you spend analyzing the news, will you ever really know in what direction the market will go?
I think you should have an understanding of the major news and topics, but you should round out your tools by using some technical analysis.
It is crucial for example to know the direction of the trend and to be aware of the major support and resistance levels since the market will usually return to the direction of the trend. A possible trading tip would be to do all of the research you need then place an order in the direction of the trend not paying attention to the results of your studies. There is a 50/50 chance that you will be profitable. If you are not, there is a good chance that the market will come back and give you a good trade. Just do not over trade your account on this one order. Give it enough room to move. If you are right, then you should have a fairly good trade.
Just sitting by your computer waiting to hear the news can be ineffective if you wait until the market has had a chance to settle in on the impact of the announcement. At this time you should not trade based on your opinion, you will be better off if you trade with the market. Fall in line with the market and want what the market wants. Just be in tune with what the market is really doing. If you are not set on a certain way you think the market will go, then you will not be disappointed. We have all seen news that the commentators said would have an ill effect on the market and what ended up happening was that the market rallied and the currency pair became stronger.
In summary, use both fundamental as well as technical analysis when trading the news. Wait until the dust settles and let the market tell you what it is going to do and how much. There will always be another trade. If you have fun and are relaxed you will be able to make more money. Always rely on a good trading system. Then the odds will be in your favor.