Trading forex with news basically is common practice in forex industry! though you will need deep understanding about economic fundamental to make this trading strategy works effectively! but don't worry guys, in this articles I will give some of the tips that can help you a lot to implement news trading style :) before we discuss about how to trade with news, first of all! you need to know how it works! why and when.
First,why economic news have impact on currency ? the answer simple because of economic laws! i.e when there's a lot of demand meanwhile supply is very limited, then the price will go up! so the question is what make a product that can attract market ;) simple i.e potential profits! investor can see potential profit if some country have high GDP, or Gross domestic product! from it they can calculate GDP per capita , if high enough investor can tell whether they can sell their product or not in that country! for example if US GDP per capita about 50k USD, it mean each people in there could spend about 4 thousand usd per month! it mean if investor can sell a product that have price about $100 or bellow they could make decent profit simple because of their purchasing power! most of the people tend to buy something if the price reasonable, but if purchasing power not good! it will be hard for investor to sell something simple because the price are not reasonable or to high! for several cases people will still buy even if the price are to expensive, but not all people! that's why GDP are very important!
the second most important question is, when currency value will rise ? if their fundamental economic changes! for big country that have high population at some point their GDP can change dramatically and attract market! just FYI most of the country that have high populations, consumption will be their biggest factor that contribute to overall GDP! that's why if factor that related directly with consumption increase their GDP will rise very significant! if this happen their currency value will get boost and shock market! simple because market can recognize it potential! of course it will need time and also market sentiment! cause after all it just number, but what make real is! investor need to test their market if true, money will flow to that market like crazy, in big number! and the result their currency will out perform another currency for long periods! but of course when GDP start to fall! currency value also will follow little by little.
after my explanation above I assume, you get the idea about how and when currency will rise and fall! so now its time to give a little tips how to trade with news :)
- Analyze Strong and weak currency! when we trade strong VS weak currency most of the time that pair movement will be more stable and predictable! actually this kind of strategy are being use for daily trader, but for news trader it can use also, to increase the probability!
- Some people said, trend is your best friends! so if the trend match and backing up for us to trade, this will give additional value and can push the currency more further!
- the most important things! find the news that have correlation with target pair! if there's high impact news, it's time for you to make profit! if news result as we predict it can move that pair push more and more! and you can make 50-100 pips in one day! but this kind of phenomena will not happen all the time! but it will happen almost every month 1 or 2 times! but you need to make this happen! i.e you have to make your own research, cause not many people understand how news trading strategy works! but good for you, you read this page ;) hehehe!
- the last part! I often make news trading after economic news comes out! the reason simple because, I want to make sure everything match and backing up! cause sometime if news result different with forecasting, it can move very wild! and also remember there's a time that market will not move like we want, even everything backing up! from weak strong, trend, news and etc. so that's why I urge you to use Stop loss, maybe 50 point or so! but you can make adjustment if you thinks worthy or not! you decide by yourself! :)
ok, guys! that's it! now you ready to rock the market ;) go.go..go...
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