News Trading Strategy in Forex Day-Trading
Trading stocks, forex, coins, or other investment instruments involves risk, especially if you’re a day trader.
However, one of the best forex strategies for consistent profit is the news release trading strategy.
It means you’ll be following news releases about your targeted currency, coin, or company, and trade after good news is released about the asset.
The fact is that traders and investors respond to the news, either good or bad, and adjust their analysis or prospects of the affected asset accordingly.
Before we go into the news trading strategy, let’s look into what day trading is all about briefly, especially for forex trading beginners.
What is day trading?
Day trading is simply the buying and selling of an asset, which may be stock, currency, coin, or commodities such as gold, oil, corn, etc within a short time frame, usually within one day.
You can study the price movements of these assets, and buy them when they’re at a low price bound, and sell at a higher price bound.
Day traders often buy in high volume and sell within a short period once the price moves to their target zone.
Having said that, speculative market trading can be very risky since the price can move in a different direction than you anticipated, this is the reason day trader is not usually advised for beginners.
You need to be disciplined as a day trader, have a tested and working day trading strategy and risk management mechanisms in place.
To start day trading, you just need to have an account with an online broker and your start-up capital as required by the chosen broker.
In another way, you may not even need to fund your account before you practice day-trading since the majority of brokers offer free demo accounts where you can practice under real conditions, but with virtual money.
Simple Profitable Forex Trading Strategy
News trading strategy is a very easy and profitable forex trading strategy since the price of most financial instruments will either soar higher upon good news about the company’s development or at least remain flat.
While news strategy is a successful trader’s strategy, it can not be banked on for consistent trading.
If you rely on it heavily, it means your chance of day-trading will be very low, you’ll only trade once in a while in a month.
With news trading, as mentioned, market-relevant news or risk events are turned into trades.
Certain events move prices and change sentiment in an asset.
News trading works particularly well in the forex market since currencies react very sensitively to political events and the central bank actions, especially the monetary policy.
News such as unemployment rate, inflation, GDP affects currency value perception and it takes effects on the price.
News such as improvement in company’s management, improved products, new products, earning reports, dividend or bonus offers affects the value of stocks and the trading volume.
News trading strategy is therefore one of the best forex signals and trading strategies for beginners, it’s easy and profitable as long as the trader can interpret the news and relate it.
You can trade key interest rate decisions, economic data publications, and market-relevant news, and many others.
To be able to plan these trades properly, you can use various news feeds such as Forexlive, Ransquawk, and Twitter. You can also look at the economic calendar every day because it offers good setups every week.
How to setup News Trading Strategy
There’s no accurate forex trading strategy but a news trading strategy can be used to complement your existing profitable trading strategies.
In forex, there are economic data releases every day and as a forex trader, you need to follow this news to adjust your trading plan.
With a common calendar like investing.com, you can prepare for it and with a little practice, you will know exactly when it is worth setting a trade.
If you understand the likely figures the central banks will release in their next meeting, you’ll be able to predict the economic data that will influence the value of the currency.
A central bank is responsible for its country’s monetary policy. The ultimate goal is price stability.
This target is considered to have been achieved when inflation is below 2%.
If the target is not reached, the central bank can think about expansionary measures such as interest rate cuts, which lower the rate of a currency.
In another case (when inflation is above the target), the central bank can raise interest rates to dampen inflation. In that case, the currency rises.
By now, it should be clear to everyone that the release of this data can create volatility in the markets. This offers opportunities for day traders.
Take Note of these two things
- Is the event/news relevant to the market?
- Is there a clear discrepancy between the forecast and the actual result?
Market-relevant events include labor market data, Gross domestic product (GDP), and inflation data.
Day trading, either in the stock market, forex, commodity trading, or in other financial instruments is not easy and not always advised, especially for traders with less experience.
However, using the news trading strategy can help to make your existing trading strategy to be more profitable.
With this article, I strongly believe that a news trading strategy is easy to set up, and you’ll find it profitable as a stock trader or forex trader.