Political and economic news are the main sources of fluctuations in the global stock market. Even rumors of events such as decreasing interest rates in central banks, litigation between the governments and large companies, a sudden rise in inflation and unemployment, or a deterioration in the international situation always cause outrage on the exchanges.
News trading basics
First of all, you must always have economic and financial calendars at hand.
The main principle of trading news is finding the event that can have a significant impact on the specific market. Usually, the events in the economic calendars are sorted by importance. The more important the event, the higher volatility you can expect after the publication.
The market reacts differently to different news: the prices may rise or fall. If you have basic knowledge of the country’s economy and can predict an unemployment rate, an industrial production index, or refinance rates for the next few days, it makes sense to sell assets at a profitable price (because tomorrow they may become cheaper) or buy some more of them.
This is similar to the reaction of investors before the payout of dividends and after the biggest corporate scandals that cause stocks to rise or fall. In macroeconomic terms, much depends on the country:
- Forex news trading in the UK is usually associated with the retail price and sales growth, Bank of England statements and unemployment rate, as well as GDP and CPI growth.
- The top economic indicators for the German economy are ZEW (Indicator of Economic Sentiment) and IFO (Business Climate Index), which represent the aggregate indicators. European Central Bank announcements also have resonance.
- The most popular news topics in the USA, Canada, New Zealand, and Australia are unemployment rate, consumer price index, refinance rate, GDP, and CPI.
It is very important to track the news to know when a particular publication will be posted and which trading instruments it will affect. Thus, you can make the decisions in advance and even place pending orders to open long or short positions.
When trading the news, you should consider the following aspects:
- choose only a strong currency pair that can affect a specific event;
- the transaction should be carried out in the currency of the country that contributed to the news release;
- it is recommended to analyze the economic calendar and add notes to transactions every week;
- check the watch every minute, as it helps to assess the current market situation and publish the news without delay.
Compliance with the above recommendations allows you to minimize losses and earn a steady income from trading Forex news.