Forex Trading Using Economic News.
In this article I want to talk about a popular tendency that occurs among Forex traders wanting to take advantage of market lack of effect in the release of economic news. Although this strategy is somewhat dangerous, I’ve seen how traders benefit from it.
What are the principles of operating of economic news?
Some institutions, for instance the Federal Reserve System, announce the release of economic data, such as non-farm payments, gross domestic product, consumer price index and so on. You can always find a calendar of outlet of economic data on the Internet. It is tested historically that different economic news will affect the price of currency pairs that are associated with them. For instance, Non-Farm Payrolls tend to strongly influence the U.S. dollar.
Notwithstanding in the long term it is very complicated to predict the price alteration of specific currency pair, typically on the news there is a short-term spike. This spike is the result of discrepancy between the predicted figures (consensus) and the actual data that was announced. This phenomenon has allowed many traders to find the ways to take advantage of divergence between the consensus and the actual economic data.
Selection of time.
Between the release of economic information and alteration in price of specific currency pair there is a time delay. Precisely because of this lead time, a lot of traders can use this lack of effect in their interests. Typically, in the room where economic data is declared it is allowed only a limited number of staff of major news agencies. After the announcement of the news these employees have to pass data to the newsletter of the organization, such as Reuters or Bloomberg.
The key to success according to the choice of the time for the trader is to enter into a transaction before the spike begins to form. Prior to the release of data the most of the “clever money” is in standby, but only they receive information, they start trading. Therefore, for a trader the speed at which he can obtain information becomes very critical. Thus, if a trader has a rapid access to news and the software tuned to the divergence between the consensus and actual data, then having demonstrated agility, he is able to get to windward of some of the trade banks. Often, banks use the same technology as traders, trying to profit from these situations.
And while numerous more “dark money”, which enjoyed slow news providers, dropped on the spike later than the traders with professional information services, promote a price far enough so that clever traders started to come out of their positions.
Trading on the spike.
To enter before the spike, it is required some technique. First, you should have a quick data provider; you may buy Bloomberg or Reuters. The option may be subscription to the service, which transmits signals during the news release. These services usually have a lot of channels of fast delivery of data and transmit signals to buy and sell. These services are usually more inexpensively and easier to implement than paying thousands of dollars for fast data retrieval. This type of service has only one disadvantage – delay of signal propagation.
Currently people are looking for additional or even primary sources of income as never. World economy is still in tough condition, and to get a well-paid job is not that easy task. And forex is one of the ways to earn some money. To trade successfully one needs to know events on the market, so live forex news is of great help here. Those who don’t know where to get forex market news can use the Internet. Just type “forex news trading“, for example, in Google or other search engine and you will get many news sources to choose from.