While inexperienced traders can sustain big losses trying to trade around the day’s news and data releases, there are some lower-risk news-driven opportunities as well, especially in the current markets.
Okay, I finally confess to you all: I love trading forex on the news!
If you are reading this statement and are a student of mine or familiar with my previous articles, you may actually be thinking that I have been pulling the wool over your eyes up until this very point due to the fact that I have spoken time and time again about how I keep my trading simple by just objectively following the imbalances in supply and demand on my technical price charts.
Well, I can assure you this is very much still the case, and I highly doubt that it will ever change as long as I am trading the financial markets. However, just because I make my trading and investing decisions upon a simple set of technical rules does not mean that I ignore the news altogether.
In fact, as of late, I have been factoring the news and current fundamental outlook into my daily trading activities even more than ever, but not in the way you would probably think. Let me explain more.
In all honesty, my opening statement about loving the news was slightly in jest. I would never advise any novice or even veteran trader to attempt to trade the news. In that, I mean when major economic announcements like non-farm payrolls are made, or Fed statements are released to the general public.
See related: Why Traders Should Ignore the News
Trying to interpret the data or figure releases as they come out can easily result in trading suicide if you are not careful. However, I have found that if you are truly objective in your analysis and only select the highest-probability trading opportunities that offer the best risk/reward profiles, then trading around the news releases can be quite a rewarding experience.
I also like to pay attention to some key aspects of fundamental anal! ysis whe n I trade, but moreso in a method which allows me to use fundamentals in a technical manner. There are some unique relationships between various markets which can help the disciplined forex trader in many ways, but again, only if they are willing to apply key rules around their daily trading activities.
As we all know, Europe is in a pretty big mess. As much as the European Monetary Union seemed like a good idea at the time when the bulk of European nations gave up their currencies to adopt the Euro, right now, I would like to wage a bet that they don’t quite feel the same enthusiasm for the single currency system as of late.
With the ongoing drama of Greece’s debt worries (which can you believe have been going on for around 18 months now?), fears of contagion spreading across the continent, and general concerns about the prospects of a double-dip global recession, the last thing the markets needed was the news on November 9 that Italy had now joined the growing list of debt-ridden nations.
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