Trading on the Forex news is a popular strategy that is generally adopted among both professional and barely experienced traders. Apart from the standard high volatility accompanying important economic releases, Forex traders try to earn by predicting the outcome of the news, successfully forecasting the markets reaction. However there are three important points every news trader should know before reacting on the Forex news:
- Generally its a good idea to set the entry orders before the actual news release. Use stop and limit orders to make the entry to trigger automatically and at the desired levels even on a very volatile market.
- Setting stop and limit orders for entry is a good way to automate the news trading, but it is also a good idea to stay near your trading platform during the news release. Sometimes the market demands your personal reaction and your own understanding of the current situation to bring you profits and save you from losses.
- You should know beforehand if your broker allows news trading. Many Forex brokers forbid trading during the news of the high importance to the Forex market. They can do it either via their terms of service or via some technical obstacles. Some brokers widen their spreads to extreme values during the news, while the others just stop reacting to the traders orders. Do not even try earning from the news trading if your broker does not allow it.
Do not be scared to trade on the Forex news. It is a good tactic for every kind of trader and will work on the most Forex brokers. Just try to avoid the common mistakes associated with this trading strategy.