Forex News Trading, Analyzing Forex Economic Reports - Forex: A Guide to Fundamental Analysis PDF - Fundamental Analysis for Forex Trading PDF
Forex News Trading - Economic news releases often evoke strong moves in the forex currency market, creating a lot of short-term Forex trading opportunities for breakout traders.
However, not all economic news reports are tradable. Some of the forex news reports have a significant effect on the forex market while others do not have any effect. By looking at the forex economic calendar - traders can find out the significance of the upcoming forex news reports, find out whether the economic forex news report is worth trading or not.
The Forex news reports are marked in terms of significance. There are three levels of significance: RED, ORANGE, GREEN. The most significant forex news reports are marked in red; the least significant are marked in green, while those marked in orange are in between.
There are two general approaches to trade forex news: Forex News Trading Methods
Trading the breakout channel
Forex Traders simply set Buy and Sell limit orders on both sides of a forex price channel, so when the economic news data comes out one of the orders will probably be hit. Although this forex news trading method is very simple, it also carries real risks of potentially hitting two orders: Buy and Sell as the market is shaken by the forex economic report. In such a double-hit situation traders will face losses on one or sometimes even both trades.
By analyzing the forex news report
Forex Traders can predict most probable outcome of the forex economic news by looking at the forex economic calendar fields labeled as Forecast and Previous. These figures are then compared with the economic data released to give an idea about the current economic situation.
Forex Traders watch the forex news report and pay attention to the actual numbers released. If the numbers come as a surprise meaning the forex news reports are not close to what was expected or forecasted, then fundamental analysts opening forex trading position according to the forex economic news reports. If the forex news report is better than expected then fundamental traders open Long positions. If the forex news reports are not favorable - traders open Short positions.
The most important thing you have to know about forex fundamental analysis is the market expectation of an economic indicator. Economic analysts provide a prediction of a probable number of the economic indicator to be announced. This has an impact to the forex market and traders are positioned accordingly. When the economic indicator is announced it affects the forex market only when the forex news report is different from what the forex market expected. That happens because every data of the forex news report available to the public information is already taken into account.
Example of Forex Trading News
The best forex news trading strategy, is one that is based on the forex economic calendar to time when the forex news release are to happen so as to trade these forex economic data reports. A trader will keep a schedule of these times and prepare how to trade the data before and after the forex economic data report is released.
A trader can get the times of when economic data are to be released by observing an economic calendar. The forex economic calendar contains the time-table of when forex news data reports are bound to be released. The forex calendar is compiled by Financial Analysts and Economist who study the fundamental reports and economies of the world. This Forex Economic Calendar will show the timetable for all the forex news releases scheduled for the next 30 days.
By having this forex economic calendar a Trader can schedule when to trade these economic data reports well in advance. To obtain a copy of this forex calendar a trader can search for "Forex Calendar" and you will find a couple of these forex trading calendars online hosted on various Forex trading websites.
An Economic Calendar will normally have three readings:
- Previous Reading
- Actual News
Previous Reading - This piece of the data shows the previous value or reading of a previous forex economic news reports. Most fundamental news reports are in the form of numeric numbers or percentages.
Forecast - Forecast shows the value for the news that economic experts predict for that particular news report. This value is forecasted way before the date of the economic release. Economic Analysts and Financial Analysts will put across their forecast.
- If the forecast number is better than previous, Forex Traders will buy the currency associated with the good forecast
- If the forecast number is worse than previous, Forex Traders will sell the currency associated with the bad forecast
Actual News Release
This is what will determine if there will be a large forex price movement or none at all.
If the actual news data release is same to the forecast, then there will not be much movement, this is because Forex traders anticipated this data and have already traded the news even before the actual economic data was released.
If the actual news release is not the same as the forecast, this will come as a surprise to the traders, if the forecast and actual data release is not the same then, the traders will have to adjust their trades accordingly and this will cause a forex price reversal in the opposite direction.
If likewise the actual news data reading was way better than expected, then price will continue moving towards its direction and gain further momentum towards that direction. Likewise if the actual forex news report is worse than predicted, forex price movement will also continue in the same direction as that of before the news release and this time gain more momentum and move further towards that direction.
Example - Forex News Trading Example:
When the new information is announced then it has impact on the forex market only if it is different than expected. If the forex news data information is as expected then it has no impact on a forex currency price movement because the information is already available to the public and has already been taken into account.
In order to use forex fundamental analysis, you should first be able to know economic market indicators - forex economic indicators. Forex Economic calendar containing all the fundamental indicators is created by economists. Economists also use this Economic calendar to predict different news reports. These predictions are provided by market analysts. This can have great impacts on the forex market. Traders will watch out for news announcements that have a great impact on the financial markets.
When are economic news released? Forex News Trading Strategy
Economic Reports Announcement Times of the major economies and major currency pairs traded in the foreign exchange market.