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Thread: Trade Using News: Helpful Hints

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    Default Trade Using News: Helpful Hints

    RefcoFX has compiled a list of the most common questions regarding trading on news. Here is what our trading specialists had to say...

    Why are economic events important to currency traders?
    A currency is a proxy for the country it represents, therefore the economic health of that country is priced into the currency. Economic indicators measure the health of an economy. The challenge is keeping track of each particular country's economic health.

    Know when indicators are due to be released. It is important to keep an eye on the future and knowing which news releases the market deems most important.

    Why are some indicators more important than others?
    Current market conditions will influence which news the market deems most important. Know which economic indicators are capturing most of the market's attention. When the US is incurring large trade deficits, the market will focus on Trade Balance data. Its news release can catalyze large volume and price movements. Moreover, during an US economic boom with high employment, the market will not focus on unemployment.

    Economic conditions can change. Large US Trade Deficits can weaken the US Dollar over time. When the US Dollar is weak the market will shift its focus to inflation. Market watchers will shift focus to CPI and FOMC Interest Rate Decisions in the news.

    What is the significance of "actual versus consensus"?
    The data itself is not as important as whether or not it falls within market expectations. Know when the data is released in addition to what market forecasters are expecting for each indicator.

    Once you know the market expectation for the economic indicator, pay attention if the consensus number is met. A drastic difference between the consensus and actual results can cause price movement.

    The consequences of an unexpected monthly rise of 0.3% in the Consumer Price Index, the Actual, is not nearly as important to your short-term trading decisions as it is to know that this month the market was looking for CPI to fall by 0.1%, the Consensus.

    Wait until after you've taken advantage of the short term trading opportunities presented by the data, typically within the first thirty minutes following the release, to analyze the longer-term ramifications of an unexpected monthly rise in consumer prices.

    Remember that market expectations for all economic releases are published on our economic calendar.

    Why should technical traders pay attention to news releases?
    Technical analysis will not work when fundamental factors or economic data becomes the main focus of the market as participants become sensitive to any developments. With speculation mounting on the possible outcomes, fundamental news releases like US non-farm payrolls have created situations in the market that do not adhere to technical analysis as volume and volatility spikes. Although the aftermath more than not will once again adhere, the mass speculation that ensues makes sure that traders are scrapping for the best price available in filling their positions rather than applying your everyday moving average or price oscillator.

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    the key for trading the news is how big is the difference between forecast and actual result. i use a system called trigger.

    for example, from past experience, USA CPI make a movement if the actual number differ at least 0.2 from forecast/consensus. so 0.2 is the trigger for USA CPI. unless the actual result differ 0.2 (or more) from forecast, i will not trade.

    you can make your own trigger by making a journal during news time. write down what news are more important and have a high impact. how big is the difference from forecast can trigger a movement.

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    Quote Originally Posted by fxtrader View Post
    the key for trading the news is how big is the difference between forecast and actual result. i use a system called trigger.

    for example, from past experience, USA CPI make a movement if the actual number differ at least 0.2 from forecast/consensus. so 0.2 is the trigger for USA CPI. unless the actual result differ 0.2 (or more) from forecast, i will not trade.

    you can make your own trigger by making a journal during news time. write down what news are more important and have a high impact. how big is the difference from forecast can trigger a movement.
    You are right , I will try it.
    Thank you for your introduction .

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    well i think it is very risky for any newbie to trade while news . it need good experince and much practise to understand the effect of the news on the currancy.

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    but what if the newbie learnt with that method it means that he would have to learnt a new method but if he understands it no problem for me.

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    If you keep avoiding news as a newbie, then it will be a problem understanding it in the future. So try to learn how to trade use. Search for fundamental resources.

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    The most important thing a trader should know while trading to the news release is his analysis and they should be strong so that he knows the impact of the news release on the markets and is able to perform his trades accordingly and make profits .

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    yes, we can use those trading news parameters well and find out the market coming trend .Its the vital tool of success.

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