News Trading Plan To The Foreign Exchange Market - Finance

News Trading is usually a specialized method of trading that takes advantage of the volatilities that happen through release of high impact news .. Every major economy releases its economic indicators like the Gross Domestic Product, Retail Sales, Consumer Price Index, Short Term Interest Rate, and so on. .. repeatedly, and most economists will try prognosticate the outcome of these releases, through combining these forecasts and averaging them out, we now have what is known as- consensus expectations.

News trading usually takes the estimate numbers, or consensus expectations, and compares it with the actual release figure from the official sources, and if the prediction is incorrect by a large margin, market will respond straight away. .. and also by zero in your trading on this shock, news traders can minimize the time spent in trading, the risk related to investing, and naturally, increase the potential for gains in the process.

Obviously in order to know news trading, we must grow your own Forex Strategy. You have to understand the assumptions of news trading before exercising this kind of trading, because when with anything in life, news trading is just not absolute, and there exists a margin for mistake because the market may be driven by other elements such as the risk sentiment, order flows, long- term and short- term fundamentals, and let us not forget, the technical outlook of the fx pair.

The first assumption in News Trading is that market is at equilibrium. Essentially this would mean that market has already priced in everything that has ocurred and will happen up to the point of the news release. If the news release happens to bea shock, then the market will want to correct itself in the appropriate direction and reach that balance once again. For example, in the event the news is positive for USD, then we should expect USD to gain after the news, so we ought to Purchase United States Dollar.

The 2nd presumption in News trading is the fact that market generally exaggerates in its moves. Compare it to the term "snow ball" effects as when market starts to push, traders will want to joining in the actions, therefore causing the market to over move. It is rather accurate as we can repeatedly see the currency market pushed by high impact news many times for hours or even days. If that is not thought to be market exaggeration, then in all probability nothing is.

Last but not least, news trading presumes that the market will move when a certain level of shock is reached. Certainly, this so- called surprise level is based on historic statistics, but the presumption is that if for a particular news event, let's say the Interest Rate release, differs from the forecast by . 25%, then the market will shift 100 pips minimum. Therefore, let's say that if the ECB, or the European Central Bank, releases its interest at 2. 00 Percent where the market is anticipating a 2. 25 %, we ought to see traders selling the Euro immediately by a minimum of 100 pips. as a matter of fact, if this ever happens in the real market, I really believe 100 pips is probably on the low estimate. news similar to this could push the market by 200 and even 300 pips easily.

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