Every month, there is a calendar of the release of certain important socio-economic and political news items that tell a story of the state of the economy of the nation where that release emanates from. These Forex news releases usually provide the benchmark for market sentiment, which ultimately determines the direction of the currency pairs.
Trading news releases provides great opportunities because of its ability to increase volatility in the short term. It has to be said that the impact of some news items change as the socio-economic demographics of a nation changes.
But the collapse of the subprime mortgage market and the attendant effect on financial institutions such as Bear Stearns and Lehman Brothers, which triggered the global financial crisis changed all that. Now housing stats are medium to high-impact news items as the state of the housing market is now seen as a measure of the state of the US economy. This is a very volatile news item, and it is also a very tricky one to trade. It is not recommended for beginners to trade the US Employment Data because of the complexity of the trade; some level of experience is needed to pull this trade off successfully.
Two data are released; the NFP and the Unemployment rate. The USDJPY is the currency pair that has the most direct response to this news item and is the currency of choice to trade. For a successful trade setup to be accomplished, the data must not have a conflict. What do we mean? NFP is more positive than forecast, and unemployment rate reduces or is unchanged. NFP gives more negative numbers than forecast, and unemployment rate increases or is unchanged.
Please note this very well. Many traders have been burnt because they failed to identify these scenarios before trying to trade. This is one of the most direct news items that any trader can trade.
It is pretty straightforward. If the GDP is better than forecast, the local currency of the country in question will gain in value against other currencies.
If the figure is worse than forecast, the currency will depreciate. Trading the Core Retail Sales is also another good one. Consumers tend to spend less when there are no jobs and the economy conditions are unfavorable. Again, the report is pretty straightforward. Numbers that are better than forecasts lead to appreciation of the currency of the country in question, and poor figures lead to the reverse.
If you can master how to trade these news items, you will be sure of steady pips every month. However, what you need is a clear and rule based strategy. So, stay tuned, because in my next blog post, I will share with you two of my favorite news trading strategies , I use for years with great success.
I am putting your advice into practice and guess what? I trade all currencies paired with USD. If am wrong, please clarify me. Hello Chan, Thor trades when the market is the most predictable, not only during news events.
Thor is fully automated. Your email address will not be published. Leave this field empty. Economic news releases are of three types: These are the news releases that impact the Forex market the most and which cause the greatest volatility levels.
In this class are the employment data, interest rate decisions, GDP figures, retail sales, manufacturing data and the inflation reports. Here we have the housing statistics and trade balances. Every other news item outside the ones listed above, fall into this class of low impact news items.
These two data are released at EST on the first Friday of every month. US Core Retail Sales figures. There are two data released retail sales and core retails sales , but the Core Retail Sales retail sales less energy sales is more important. Trading the US Employment Data This is a very volatile news item, and it is also a very tricky one to trade.
NFP is more positive than forecast and unemployment rate increases. NFP is more negative than forecast and unemployment rate reduces. Trading the Gross Domestic Product This is one of the most direct news items that any trader can trade. Take care and trade well!! Related Posts By Category. August 2, at 9: August 25, at August 31, at Leave a Reply Cancel reply Your email address will not be published. Blog Rating Average blog rating: Top 4 questions about Forex trading answered.
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