Trading During Major Economic News Events

Forex is one of the best investments that anyone can venture into and make a lot of money. Currency trading or Forex is the largest market with the highest liquidity ratio in the world. The trading volume average of the foreign exchange market is above five trillion dollars, which gives people a great advantage to trade and make a massive profit. The globe's stock markets put together do not even come close to the Forex trading surplus.

With Forex, there are plenty of amazing trading opportunities that cannot be found elsewhere. There is nothing in this world without its positive and negative sides and Forex also does the same. While there can be massive profits realized when trading Forex, it also comes with huge potential risks. Trading foreign exchange without the right plan, experience, and knowledge can lead to losing all your investments. One major way Forex can be risky is when you trade with mixed information from news platforms.

The best ways to trade Forex

Since Forex is a lucrative business, traders have been able to discover a plethora of ways to speculate or invest in global currencies. Some of the popular ways of trading foreign exchange include currency futures, sport Forex, ETFs, listening to trendy market news, signal indicators, and much more. The truth is that news trading happens to be the most profitable way of engaging in Forex but also remains highly risky. For instance, if you get mixed information about the rise or fall of currency pairs such as USD/EUR or USD/JPN, it may eventually affect the outcome of your trade, which can lead to losing plenty of money.

Another way news trading can be beneficial and risky is through major events that occur in the Forex market platform. Some major economic news events that can affect the foreign exchange market are consumer price index(CPI), gross domestic product(GDP), retail sales index, NAPM, unemployment & employment indicators, durable goods orders, consumer confidence index, interest rates, Beige Book, nonfarm payrolls data, trade balance, industrial production, producer price index, central bank rate decision, FOMC meeting, and much more.

America's Federal Open Market Committee gathering remains at the center, even while the Central Bank meetings of all economies are crucial. It is simply because the world's reserve currency is the US Dollar. Any FOMC meeting is liable to create massive market volatility like what happened on March 18th of 2015 when USDEUR jumped up by four hundred pips in a couple of minutes. It simply means that at the time, the meeting was channelled to be USD negative. When the ECB unveiled its QE program on Jan 22nd of 2015, the USDEUR was found to fall by over six hundred pips.

Markets often react to the unemployment rate of any country in the Forex world. It is because the unemployment rate remains crucial to Central Banks to know the current health condition of any economy. The interest rate will increase when the employment level in any nation is high to help Central Banks balance growth and inflation. These figures can draw massive attention and caution from people trading Forex. The US NFP and ADP figures are the two most crucial labor statistics released every month alongside with the unemployment rate. NFP takes the prime position among the figures because it gives attention to the actual date the Fed rate rises exponentially. The ADP data often acts as a crucial prognostic instrument for the NFP because it is released earlier.

How to avoid news trading?

Consulting the news calendar is the first step to avoiding it entirely. Every trader should be aware of any upcoming news because they tend to impact the Forex market greatly.

The second approach to this aging problem is to stay out of the market before any major economic news releases. It is a good idea for traders to wait for the market to make its mind and digest the news. Traders should always be patient to read the concept known as ''the knee jerk reaction'', which remains a false move in a given direction and later accompanies by the real trading movement. Ensure to concentrate on the newly formed trends and engage in the market only when the no knee jerk reaction is obvious.

If your lots aren't really small, then big stop losses may be a bad idea. On this note, traders should always use primarily technical analysis, risk-reward ratio, and look for some middle platforms to determine stop-loss restrictions.

Closing note:

The main thing with news releases and all economic indicators is not the information that matters, but how the Forex market reacts to them. The uncertainty and volatility may be overwhelming for new traders looking to make money from Forex by listening to news releases. Using reliable and well-designed indicators assigned to trading news events can help you make money in Forex.