How to Trade Forex News

Author: Tom Long

It happens almost every time the market reacts to a scheduled news release.  New traders get caught off guard as they are unaware of what is coming.  Since I work with new traders as an instructor of the FX Power Courses offered by  FXCM , I always get emails from a few new traders asking why the market moved so much in such a short period of time.   I usually refer them to the economic calendar at DailyFX (http://www.dailyfx.com/calendar/) and to the commentary offered by the analysts at that website.  

Did you know that the US Federal Open Market Committee was meeting Wednesday, October 31st and will release a statement on US interest rates at 2:15PM Eastern?  Did you realize that another major release was taking place this Friday, November 2nd at 830AM Eastern?  This is when the US Department of Labor will release the Nonfarm Payrolls.  These two events may be the biggest two movers of the world’s financial markets and will have a big impact on any open trades.   You can find much more at DailyFX, including some recommendations on how to trade these events.

This is much better than not realizing what is happening and watching in horror as your profitable trade turns into a big loser in a matter of a couple of minutes.  If you are trading, you should make it a habit to check the economic calendar at the beginning of every week to make sure you are aware of what is about to be released.  

Being prepared for volatility is always better than being surprised by it.  You may not be able to profit by the big moves, but you sure can protect yourself from big losses, and that may be more important to your success as a trader.    

Trading the various news events is popular in the FX markets.  It is very tempting to want to jump into a trade right after an economic report is released and make 100 pips in a minute.  Who wouldn’t want to do that?  However it isn’t that easy.  

By the time we see that release and can react, the market has already started to move.  Usually by the time you are filled, the price has moved quite a bit from where it was before the release and a big portion of that 100 pip move may already be over.  

That calls for a change of strategy.  Unfortunately, many new traders think that means trying to find out what the release is before anybody else so they can place their trade first.  But that is more wishful thinking than a change in strategy.  

Article Source: http://www.articlesbase.com/investing-articles/how-to-trade-forex-news-318522.html

About the Author:
Tom Long is a forex instructor for  regulated forex  broker.