Forex news trading is probably one of the most exciting forms of trading because it can produce instant profits and instant gratification. Our team at Trading Strategy Guides has been getting lots of questions in terms of how to trade around big Forex news events. Through this news trading strategy guides, youll learn how to trade theNon-Farm PayrollReport (NFP), FOMC, central bank interest rate decisions and any big Forex news events.
What youre about to learn throughout this Forex newstrading guideis extremely valuable because there are a tiny, tiny few traders in the entire world who apparently are able to correctly trade the news.
This has the potential to completely change the way you see Forex news trading and how to make money trading. Before diving more into this Forex news trading guide you can check out 2 key invaluable tips that will help you make money in the long run:How to Make Money Trading 2 Keys to Success.
There are many misconceptions about Forex news trading, but were here to debunk all the myths.
Lets move forward and debunk one Forex news trading myth at a time.
Were sure if you have been for quite some time in this business, you have come across some of these myths. First of all, we have two groups of people: weve got the traders who dont trade the news and traders that trade the news.
The first group of traders treats Forex news trading as something to be scared of, so youll hear things like the news should be avoided and if there is a high impact Forex news event you should just stay out of the markets. This fear of Forex news trading is irrational and only shows a lack of understanding of the markets.
Forex news trading is unpredictable and high risk is another myth that needs to be debunked. Throughout this news trading strategy guides youll learn how having the right approach to Forex news trading it will make news trading predictable to a certain degree.
Forex news trading can be profitable. The process to predict the news can be fairly simple if you put in the necessary time, practice and efforts to understand the mechanism behind Forex news trading.
Now well show you, how you can know which way the price is going to go before the news comes out. Weve developed a simple three-step process for Forex news trading. Here is anapproach to currencies by Warren Buffett.
Following this Forex news trading step by step guide, youll be able to achieve consistent profits in the long run. As we mentioned previously, weve developed a simple news trading strategy that follows a three-step process:
First of all, you need to decide which Forex news events to trade.
Which currency youre going to trade on that particular Forex news event.
Establish in which direction that currency is going to move.
You also have to answer another important question whether youre going to enter before that news event is released or after. This question is related to the last point of our news trading strategy three-step process. Here is another best strategy calledtrading volume in forex.
If weve established a firm bias on how the currency will react to the Forex news event than were going to get in before the news comes out because we already know which way the price is going to move. However, if we cant establish a clear bias, depending on how the market reacts we might or might not get an entry price. This might sound too good to be true, but moving forward, were going to show you evidence that its possible to successfully trade the news.
The Forex market trades 24h around the clock which means that the Forex economic calendar will have scheduled Forex risk events from different parts of the world. However, not allForex news eventsare created equal and we should only focus on high impact news that has the potential to generate big Forex moves like:
For the purpose of this newstrading strategy, were going to choose the NFP report because it tends to produce spectacular volatility thus generating great trading opportunities.
After you have picked your key Forex news event that you want to trade its time to make sure you pick the right currency for that particular news event.
When trading big Forex news events you want to focus more on the major currency pair and the most liquid currency pairs. For example, if you trade the US NFP report you want to focus on trading the USD crosses like EUR/USD or USD/JPY. Our team at Trading Strategy guides has found out throughout extensive research that USD/JPY is more predictable during the NFP report than any other currency pair.
If the BOE announces the interest rate decision you want to focus on trading the GBP/USD. By now you hopefully you get the picture.
Establishing the bias requires some work from your part. You need to read the news to absorb the sentiment. This is very simple as you dont need to have fancy equipment to do so.
For example, the market consensus for the June NFP report was 181k versus 174k from the previous reading. This means that the market sentiment and the build-up ahead of the news release were quite positive. However, theNFPreading below 200k is still not enough for the Fed who seeks to hike rates, in which case it needs to see stronger evidence of a healthy labor market.
Now, getting our focus to theUSD/JPY price chart, we can also notice that the market was already trying to discount the positive NFP numbers as USD/JPY rallied right into resistance level prior to the NFP release. We want to emphasize the importance of relying on technical analysis andprice actionwhen trading the Forex news events. Actually, trading the news without the price action is more like gambling because the price can give us lots of information on the news before it even gets released.
The easiest way to interpret the price action is through support and resistance and our team at Trading Strategy Guides is proud to show you how to correctly trade support and resistance here:Support and Resistance Zones Road to Successful Trading.
There is an unspoken truth about trading which is that when the majority of the market participants are positioned on one side of the market usually the market goes in the opposite direction.In our case, we can note how the majority of traders were positioned long going into the NFP release and they must be wrong.
Once we have established they are wrong, we can safely enter short, because we have the technical in our favor, the market sentiment used as a contrarian indicator and last but not least the NFP forecast number wasnt that great either if you take into consideration the current state of the US economy and the Feds monetary policy stance.
What happened next is that the NFP figures come out, but missed the market expectation and only shows 138k new jobs added which is an awful number that is negative for the dollar and the USD/JPY pair.
The most important thing you need to keep in mind is that you dont need to trade all Forex news events. Only trade when you can establish a firm bias and when you have strong evidence to support your trading idea. Here is another strategy calledThe PPG Forex Trading Strategy.
When trading the forex news you need to pay attention first to which currency to trade, secondly is the direction (up or down), thirdly you need reasons and evidence to support your bias. You also need to know what the market expectation for that Forex news event is. Everyeconomic calendarcomes with forecasted figures for all Forex news events so this is easily accessible to you.
Last but not least, you need to assert the market sentiment by studying price action and usingtechnical analysistools. If you cant find an agreement between all these factors then you shouldnt be trading the Forex news events.
Please leave a comment below if you have any questions aboutWinning News Trading Strategy!
Also, please give this strategy a 5 star if you enjoyed it!
Please Share this Trading Strategy Below and keep it for your own personal use! Thanks Traders!
With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.
Mass Index Ultimate Guide to Trend Reversal
Best Forex Indicators to Generate Buy and Sell Signals
Fundamental Analysis of Stocks 5 Financial Ratios to Follow
Options Spread Strategies How to Win in Any Market
Algorithmic Trading Strategies The Complete Guide
Futures Trading Strategies (Trading Futures for Dummies)
Best Cryptocurrency to Invest in 2019 Our Top 4 Picks
Day Trading Cryptocurrency How To Make $500/Day with Consistency
How to Trade With Exponential Moving Average Strategy
The Best Bitcoin Trading Strategy – 5 Simple Steps (Updated)
Using Volume Trading Strategy to Win 77% of Trades
816 Ligonier Street 405 Latrobe, PA 15650(724)
Disclaimer: Trading carries a high level of risk, and may not be suitable for all investors. Before deciding to invest you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.>