The Forex exchange is a huge market where traders make money on buying and selling currencies. The daily turnover on Forex is reaching $ 7 trillion, and the level of market liquidity is very high.
Forex is a worldwide platform to earn on exchange rate fluctuations. There are many efficient trading strategies, and trading on the news or Straddle trade is one of the unique approaches of Forex.
This type of trading provides an opportunity for high profits not only for experienced but also novice traders. It can bring you a 50-100% monthly income of the deposit. Everything depends on the correct application of the Forex news trading strategy.
Learning to understand the market news, a trader more confidently behaves on the market, finds a solution for most non-standard situations, and minimizes possible risks in unsuccessful trades. What lies behind news trading?
What News Matters?
First of all, these are fundamental events and statistical and other important indicators published in the economic calendar. Every broker implements such a calendar on its platform. It uses special markers to indicate the potential influence of the event on exchange rates.
The brokerage platforms usually publish only a general calendar of strong news, which, according to statistics, are most suitable for trading. But trading on the news also includes minor events that traders can use for a more in-depth analysis. You can find this information on the web doing some searches on your own.
The information flow is very versatile, so for beginners, trading on the news can be accompanied by difficulties in dividing news into global events that affect the market on the whole and minor happenings that affect only one or a maximum of 2-3 assets.
How to Analyze the Economic Calendar?
Drawing up a trading strategy on news, the trader needs to analyze the news calendar for the upcoming trading period. The vital factors are:
- the approximate time period when you can expect the release of strong news;
- understanding of how the market works when news comes out and how you can make a profit out of it;
- the ability to combine news and technical analysis.
You need to understand what events may have an influence on the market. Trading practice, which has been formed over many years, indicates that a number of economic factors can significantly affect exchange rate movements. Here are some of them:
- Central bank decisions on interest rates.
- Inflation rate.
- GDP and industrial production.
- Business activity indices.
- Statements of financial officials.
Unexpected news is extremely rare in the Forex market. As a rule, all the news coming on the market is planned. The foreign exchange market is waiting for the release of this news and is trying to prepare for it. Before the news is officially released, experts publish their forecasts about the possible behavior of exchange rates.
How to Trade Using News?
Usually, traders use the following strategy. Approximately 10-15 minutes before the news release, they set Buy Stop and Sell Stop orders with some deviation from the current quote. It is also necessary to set Take Profit and Stop Loss, which then move with the price in the process of trading until the moment of publication.
Then it is time to wait for one of the orders to open in the direction of the price movement and delete the opposite one.
The key task of the Straddle Trade strategy is to correctly identify the point at which pending orders will be opened. On the one hand, they should not be too close to avoid a false opening or even a double stop when the big players try to get rid of the small ones before the news breaks out. But if you opt for a too far point, you may miss momentum to trigger and generate normal profits. The advisable parameter is 10-40 pips in each direction.
Wrapping up the above, it is important to understand that the foreign exchange market is particularly prone to short-term movements caused by an economic news publication. If you want to successfully trade on the news in the Forex market, then, first of all, you need to know when to expect the release of certain data that are most important in the current economic environment.
You should also know how to use this information to make a profit. You will get the best result by combining the fundamental analysis with the data of technical analysis.