News Events And Forex Profit: Strategies For Traders In Canada – One of the big advantages of currency trading is that the forex market is open 24 hours a day, five days a week (from Sunday, 5 p.m. to Friday, 4 p.m. ET). Because markets are driven by news, economic data is often the most important catalyst for short-term movements. This is especially true in currency markets, which react not only to US economic numbers but also to news from around the world. Here, we look at what economic numbers are released at what time, what data is most relevant to forex traders, and how traders can act on the moving information. this market.
With at least eight major currencies available for trading at most currency brokers, there is always a piece of projected economic data published that forex traders can use to Make smart transactions. In fact, seven or more pieces of data are published almost every day of the week (except holidays) from the eight most watched countries. So, for those who choose to trade on the news, there are plenty of opportunities. Eight major currencies are familiar to most traders:
News Events And Forex Profit: Strategies For Traders In Canada
Currencies can be easily traded globally. This means you can manually select the currencies and economic information that you pay particular attention to. As a general rule, however, since the US dollar is on the “other side” of 90% of all currency transactions, US economic news tends to have the most pronounced impact on the market. Forex.
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Trading news is harder than you think. Not only are reported consensus numbers important, but whisper numbers (unofficial and unpublished forecasts) and any revisions to previous reports are important as well. Also, some releases are more important than others; this can be measured both in terms of the importance of the country that publishes the data and the importance of the publication relative to other pieces of data published.
Figure 1 lists the approximate timing (Eastern Time) of the most important economic news for each of the following countries. This is also a time when forex market players pay more attention to the market, especially when trading based on news.
When trading the news, you must first know what information is really expected that week. Second, knowing what data is important is also key. In general, the most important information regarding changes in interest rates, inflation and economic growth, such as retail sales, manufacturing and industrial production:
Depending on the current state of the economy, the relative importance of these issues may change. For example, unemployment this month may be more important than decisions about trade or interest rates. So it is important to keep up with what the market is focusing on at the moment.
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According to a study by Martin D. D. Evans and Richard K. Lyons published in the Journal of International Monetary and Finance (2004), the market can still absorb or react to news published hourly, if not few days, after the numbers are published.
Research shows that the impact on returns usually occurs on day one or day two, but the impact seems to last until day four. On the other hand, the impact on the flow of buy and sell orders remained very pronounced on the third day and was observable on the fourth day.
The most common way to trade the news is to look for a period of consolidation or uncertainty before a large number and trade the breakout after the news. This can be done on a short-term (intraday) basis or over several days. Take a look at the chart in Figure 2 as an example. After the weak September numbers, the euro held its breath ahead of the October numbers to be released to the public in November.
In the 17 hours prior to the announcement, EUR/USD was confined to a tight trading range of 30 pips. (A pip is the smallest measure of a currency pair’s change in the forex market, and since most major currency pairs are priced to four decimal places, the smallest change is in the decimal point.) last equinox.) For those who trade the news, this will provide an excellent opportunity to take a breakout trade, especially since the possibility of a sharp move at this time is extremely high. High.
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The chart above illustrates—with two horizontal lines forming a trading channel—the indecision and uncertainty that led to the October nonfarm payrolls data, released in early November. Note the rise. volatility occurs after the numbers are published.
We mentioned earlier that trading news is harder than you think. Why? The main reason is volatility. You may be making the right move, but the market may simply not have the incentive to sustain that move.
Take a look at the chart in Figure 3 as an example. This chart shows activity after the same release as the one shown in Figure 2 (but in a different time frame) to show how difficult it is to release trading news. On November 4, 2005, the market had expected a wage increase of 120,000 jobs, but instead the US economy only gained 56,000 jobs. The disappointment led to a sell-off of the dollar against the euro by about 60 pips in the first 25 minutes after the announcement.
However, the dollar’s momentum was so strong that the gains were quickly reversed and an hour later, EUR/USD broke the previous low and actually hit a 1.5-year low against the dollar. la. Opportunities abound for breakout traders but the dollar’s upside momentum is so strong that such a bad payrolls number has failed to give a lasting mark to the currency’s momentum. One thing you should keep in mind is that, behind a good number, a strong move will also have a strong expansion.
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The chart above shows that, while a worse-than-expected non-farm payrolls numbers sent EUR/USD up for a short period of time, the strong US dollar momentum was able to take control and push higher. than. Keep in mind when the US dollar appreciates against the Euro.
One potential answer to capturing a breakout in volatility without facing the risk of a reversal is to trade exotic options. Exotic options usually have a barrier level and will either be profitable or not profitable depending on how much of a barrier is breached. The payout is predetermined and the premium or the price of the option is based on the payout. The following are the most common types of exotic options used to trade news releases:
The dual one-touch option has two barrier levels. One of the levels must be breached before expiration for the option to be profitable and for the buyer to receive the payout. If no barrier level is breached before expiration, the option will expire. The double one-touch option is perfect for trading news bulletins as it is a pure non-directional breakout game. As long as the barrier is broken—even if the price reverses later—the payout will be made.
The one-touch option has only one barrier level, which usually makes it a bit cheaper than the dual one-touch option. The same criteria apply—payment is made only if the barrier is breached before expiration. This is a good option to buy if you really have a view on whether this number will be stronger or weaker than the market consensus forecast.
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Currency options are a viable alternative for those who are not interested in getting caught up in the market by extreme volatility before they actually see the spot price move in their desired direction; There are different types of currency options available through some forex brokers.
The double no-touch option is the exact opposite of the double-touch option. There are two barrier levels, but in this case none can be breached before expiration – otherwise the option payout would not be made. This option is great for news traders who think an economic release will
Currency markets are particularly vulnerable to short-term fluctuations caused by economic news from both the US and the rest of the world. If you want to trade news successfully in the forex market, there are several important things to consider: knowing when the report will be available, understanding what information is most important in the current economic conditions and of course is knowing how to trade based on this market movement data. Research and stay up to date on economic news and you too can reap the rewards.
Incentives appearing in this table are from partners receiving compensation. This compensation may affect how and where listings appear. does not include all offers available in the market. News trading is a strategy that thrives on market opportunities when essential economic data and information hits the headlines. The main cause of a noticeable price movement or change is economic news and data during any trading session.
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News trading offers occasional trading opportunities but also risks. News Trading is event-driven and very different from technical and fundamental analysis. Trading on regular news
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