It doesn’t matter whether you’re just started trading or are already an experienced Forex trader, it is important to keep your finger on the pulse. A lot of traders fail because they stick solely to the current price trends on the market without further analysis.
This is when they tend to lose their investments because the prognosis will tell you much more about the company than the current chart. You will have to learn to understand the trading news and how they change the market via news traders. Let’s start by defining the terms and adjusting them to the current trading market.
Understanding of Trading News
What is the trading news and how should you read them? First, it is recommended to learn economic markers (or indicators), such as employment, inflation, interest rates, retail income, and so on. These indicators have a direct impact on any financial market, whether it is forex, shares, etc.
Trading news includes economic reports, breaking news, or other articles on events that change the price of stocks or other securities. The statement “buy the rumors, sell the news” happens pretty commonly in the area of trading. News traders try to catch these events and manipulate them, if possible, to change the current situation in the market.
You may see an almost immediate response after the specific article or report is released. This period of traders trading the action is the most vulnerable for you because it is a great time to make a profit. Bad news such as a terrorist attack, war, political scandal, or even one post on Twitter from a famous person will make people sell stocks.
Positive news, on the other hand, an announcement of a new product, positive economic markers, etc., will make people buy them. But it is not a rule, some traders tend to make money on negative events.
For example, the hurricane is a tragedy for people, but may be a good start for investment in home improvement retailers. Just beware of the pricing risks and traders-anticipators (we will talk about them a bit later).
News traders are more likely to release previously scheduled news, to enhance the impact on the market. Whether this news or rumors are taken from earning releases, Federal Reserve (Central Bank) meetings, the internet, or TV, news traders will make a huge announcement even on the foreshadowing description of a new major policy event from the Central Bank.
Which is supposed to soften the impact, but does exactly the opposite. It is also crucial to know, for example, current unemployment rates. If a country has low unemployment rates, then, possibly, it has a strong economy. This means it is an appropriate time for the stock market to rise.
In the end, news traders have a strong impact on the Central Bank, employment figures, trade balances, inflation rates, and currency trading such as gold, USD, and CHF. Simply put, if the news is quite shocking or at least surprising (like a black swan event), news traders will try to make the most profit out of it.
But for how long can you play with a current trend? According to the Journal of international money and Finance (2004), the approximate period of impact of news on the market is four days. Returns (or price changes) usually happen on the first-second day the news is released. The effect of buy and sell orders stays up until the third to fourth day.
How does trading news work
Despite the natural calamities which change the economic situation of the country such as war, famine, socio-political events, or gas prices the trading market can be changed artificially. That is why it is important to read them.
What news traders do:
- Collecting historical data. Traders can look at past events, collect the data, and based on that make predictions on the market’s future behavior. It is possible, for example, to guess whether the prices will go up or down if you are educated in this field. But there is a chance for this kind of collected news to be wrong from time to time.
- Fading is another strategy of news traders. You will simply trade against the current trend to extinguish it. A trader anticipator will sell when the price is rising and buy when the price is falling. It takes time and experience to clearly see whether you can make a profit out of this situation and go the opposite direction from the market or stay along with the trend.
- Collecting breaking news, comparing it with a chart, and if everything fits, then the news trader enters the bearish or bullish market, depending on the type of marketing strategy they choose.
To some, reading the news can be fatal. News can distract you from coming up with a good solution, be irrelevant, or even harmful to your mind. The only solution here is to read the news for a regulated amount of time. Don’t try to scroll news endlessly, because it will make you even more anxious.
More anxiety – less concentration, less concentration – less profit. Also, you should avoid made-up articles by simply looking for news only from trusted resources, for example, FBS. It is an online Forex broker company where you can read all needed updates on the current situation on the market for more efficient trading.