The Foreign Exchange Market remains one of the most volatile markets out there – partly because it is affected by frequent data releases. Let us have a clearer picture of the whole scenario. The currency market reacts not only to country specific news but to World News at large. In fact, economic data remains one of the major factors influencing short term movements in the market. At least 8 different currencies from different countries with around 17 derivatives are linked to your trading decisions directly.
Today, however, we will be discussing how exactly should forex traders utilize news announcements to trade. There are certainly some reliable techniques to handle this. For instance, we have already mentioned that 8 currencies are mostly used in account forex trading today. However, what exactly are these eight currencies that one should consider? We will discuss all this and more. So, make sure you’re acquainting yourself with the same.
The currencies that you should follow closely
The eight currencies that are most closely followed in the market are the US dollar (USD), Australian Dollar (AUD), Euro (EUR), Canadian dollar (CAD), British Pound (GBP), New Zealand Dollar (NZD), Japanese Yen (JPY) and Swiss Franc (CHF). It is up to the traders which currency pair he wants to choose from the list. Once you pick the currency pair, you should closely follow the news releases related to the ones handpicked by you and then place your trades. A few elements that play an important role in this regard are the proverbial whisper number, consensus figure and revisions of the news pieces themselves. Don’t forget that US economy news ends up impacting global financial trends most of the times.
The broker you’re trading with, generally offers you the economic calendar to inform you regarding the highly important pieces of news coming your way. What more? You can even make use of the special filters to find out about news that are expected to impact the market in a significant fashion. You can actually adjust the filters to avoid each and every piece of news that is related to the currency pair you’re dealing with! It’s simple—you would not really want to waste your time on headlines that are hardly going to move the market.
You should duly be aware of the exact time when the most important news pieces from different countries are slated to release. Make sure you are acquainting yourself with the varying time zones of each of the countries, so that you don’t really end up missing any of the updates.
Which type of news should you follow?
Know which types of economic news are most likely to move the market. Unemployment news, decisions on rate of interest, industrial production, retail sales, trade balance, inflation, business sentiment among others are just a few of the updates that you should closely be watching out for.
Let a trend develop
It is always important to remember that you can’t start trading as soon as news releases. You have to give time to a trend to develop post the news release before you start trading.