An Innovative Non-Technical Strategy Trading Forex News

Forex news trading is perhaps the least technical of all the expert advisor strategies on the market today. Most of the forex robots base their profit on a set of mathematical rules that analyse past price action to forecast the future behaviour of the currency. There big assumption there is the Efficient Markets Hypothesis - i.e. it assumes all the information available in the market is already incorporated in the price, and therefore there is no use in looking at anything beyond historical price movements.

Forex news trading aims to make a profit by forecasting how the price will behave just after a major piece of news affecting currency markets is released. It aims to profit from the few minutes the information takes to incorporate itself in the price. The main difference between a forex news trading strategy and the rest of the technical analysis strategies is that technical analysis requires no knowledge of the underlying (fundamental) price drivers. You can apply the same technical analysis concepts to forex and to orange juice futures, say. Whereas when it comes to a forex news trading strategy some basic knowledge is requited on what the data means in relation to the underlying market.

The great thing about forex news trading is that you can set stop losses very close to the currency market rate, and hence avoid large losses. You don't need to hold the position open past a few minutes before the piece of econometric data is released. On the other hand, if you get the direction of the economics news right (i.e. the market moves in your favour), you could be sitting on very large profits very quickly.

So how do you know when forex news is being published? The easiest way is to visit one of the many forex economic calendars on the web every morning. Open up their calendar, set it to match your local time zone and mark on your charting software the time when the news releases occur.

The beauty about forex news trading is that you don't have to be trading every single data release. If one day you don't have a view (or you simply cannot be in front of the computer trading), you can just let it go without having to have any position open. Other more long-term strategies, may require you a regular monitoring of the markets as you would have positions open over a number of days or weeks.

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Forex News Trading Strategy

Forex news trading is a strategy of trading the Forex markets based on economic news.

Just as any company's stocks get affected when financial news about the company's financial performance comes out, the same is true with currencies. A country's currency is what a stock is to a company. Any news about a nation's economic health would be directly affecting that country's currency. And this is where Forex news trading comes in. Investors practicing Forex news trading take advantage of the immediate and sometimes wild fluctuations in a particular currency when certain economic news or data is released to the public.

Anyone who has observed the markets before, during, and after the release of a very important economic data would know that there is potential for earnings that can be harnessed in Forex news trading. The important thing is for the investor to act fast.

Now, how can he act fast? Acting swiftly, like any other form of Forex strategy, can be predicated on preparation. In Forex news trading, the investor must get himself ready with the news that is going to come out. There are schedules on when these economic data are due to come out. Various Forex-related websites publish these announcements together with the previous and forecasted figures. The forecasted figures are the numbers which the market expects to come out. And usually, based on these forecasted figures, the market reacts favorably or unfavorably when the news comes out. For example, if monthly CPI for a certain country is expected to increase by 0.5%, and the figure that comes out is an increase of only 0.1%, then the market can react unfavorably towards it. Some might expect that a 0.1% increase is still positive news for the currency. But since the market is expecting a 0.5% increase, the small raise in CPI figures may actually hurt the currency.

So before the economic news comes out, an investor practicing Forex news trading should prepare himself and give parameters on how he would act when the figures come out. He should decode beforehand on what level of figure he would buy a currency, which level he would sell, and when he would just stay in the sidelines (yes, staying in the sidelines is a valuable position in the Forex markets).

By being prepared this way in Forex news trading, the investor can act swiftly and confidently since he has studied the markets and the economic indicators that are coming out. Now, getting out of the market is another issue. But it should also be included on the trading plan of the investor practicing Forex news trading. Prepare beforehand what his target profits are and where his stoplosses. And also be prepared to take contingencies should the market stall.

It is also important to note that not all forms of economic indicators have the same effect on the currencies. Certain economic indicators, particularly those directly affecting a country's inflation and interest rates, are the ones which usually move the markets.

It is also recommend subscribing to some newsletters or Forex news trading organizations in the internet where they usually email their forecast and trading plans for the economic data that would come out everyday. This way, you can have some benchmark and comparison on how you view and analyze the data that is coming out.

Forex news trading can indeed be profitable. The keys are preparing thoroughly and acting swiftly. Once you have mastered these, Forex news trading can be a beneficial addition to an investor's trading strategies.

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