Forex News Trading
Traders love markets that move and forex trading news events is a perfect time to capitalize off of market volatility and take home extra profits outside of your normal bread and butter trading system. I am going to review some common or maybe not so common wisdom traders should who trade the news.
Let’s start with basics. The adage is “buy the rumor and sell the news”, you have heard it before but do you know what it means? Think for a second. Wall Street insider and Chicago pitt traders alike know that if you here a rumor like for example the European Union is going to bail out Greece or any other country in the EU who needs assistance. That’s the rumor right? Buy on this. Once you hear the actually news headline that the bailout has actually happened then you exit your position in profit and begin selling all newbies are going to be buying the news while you are selling against them.
How to use forex news events for trading.
A popular technique for forex news trading is to use a range breakout prior to the event release. Usually this is down on a 3 or 1 minute chart. This is actually a very good way to get into a trade but it is important to be aware of the knee jerk price action that often takes place and is a bad trap many new traders fall into over and over again. Be aware of the initial direction price moves after the release but make sure not to buy or sell into this move if you missed it off the opening breakout. This move often reverses quick and sharp and two things occur, first traders following the move late just all bought or sold against this move and are now left stunned and secondly new traders will think this is the move and begin piling into the trade. This move too often reverses pretty quickly and this tends to be the direction price continues to move. If you are quick you can trade all three moves. If you are not it is suggest to buy or sell into the second move in the opposite direction the market is moving for in the direction the first move came from.
You have to be prepared and be quick when forex trading news releases. Avoid taking any trades without knowing exactly what you plan on doing before the volatility comes. Be aware spreads can be higher at these time and trade smaller size positions than you normally do. The federal reserve meeting minutes and the jobless loss numbers tend to be the biggest market movers and best for forex news trading. Please share you experiences and news trading tips below.
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