Reacting on Forex News
Trading on Forex news is a popular strategy that is generally adopted among both professional and barely experienced traders. Apart from the standard high volatility accompanying important economic releases, Forex traders try to earn by predicting the outcome of the news by successfully forecasting the market's reaction. However, there are three important points every news trader should know before reacting on the Forex news:
- Generally, it is a good idea to set the entry orders before the actual news release. Use stop and limit orders to make the entry trigger automatically and close to the desired levels even in very volatile market conditions.
- Setting stop and limit orders for entry is a good way to automate the news trading, but it is also a good idea to stay near your trading platform during the news release. Sometimes, the market demands your personal reaction and your own understanding of the current situation to bring you profits and save you from losses.
- You should know beforehand whether your broker allows news trading or not. Many Forex brokers forbid trading during the news that are considered highly important among Forex market participants. The brokers can prevent news trading either via their terms of service or via some technical obstacles. Some brokers widen their spreads to extreme values during the news, while the others just stop executing traders' orders. I do not recommend even trying to earn from news trading if your broker does not allow it.
Do not be afraid of trading on Forex news. It can be a good tactic for all kinds of traders, which can work with most Forex brokers. Just try to avoid the common mistakes associated with this trading strategy.