Some forex traders believe that the currencies move reflects the fundamentals. Thus, it is important for forex traders to always follow the forex news. Most of the big turns usually happen due to unexpected news even. Or else, it happens because of the expectations of that news events in the forex market.
Ways Trading News Event in Forex Market
Once you pay close attention to it, you will realize that some forex news has the ability to affect the forex market as a whole. Meanwhile, some other news can affect specific currencies.
Once you decide trading news events in the forex market, you have to know the important news for the currency pair you trade.
Normally, news about interest rate decisions, employment reports, and GDP numbers are important news. After you decide what reports are important, you have to watch the market reaction to that number, for a while.
Many traders hate this step since they have to wait. After you know the possible reaction from the market to the currency, then you can prepare the live news trade. Yet, do not forget your risk management.
The only problem with trading news events in the forex market is every broker has a different policy to handle trading during volatile news time. Some brokers use variable spread and some others use a fixed spread.
News Trading with a Fixed Spread
With this policy, traders usually get forex slippage or a requote. Either way, if you are looking to get a short term trade, it will be pointless.
News Trading with a Variable Spread
On the other hand, with a variable spread policy, traders will get problems once the markets get more volatile. The spread can exponentially increases.
Consequently, their trades can be negative, even when they get a good price during their entry.
Before you trade news event in the forex market, you have to research your broker policy first since that will highly affect your trading. Besides, also consider to try on demo account, first.
