Market news is a very important factor in Forex and Fixed Time Trade news-based trading strategy. By the time news comes out, the market will be more exciting than ever. Some cases will make investors cheer for the money earned. But many cases make traders distort their faces when they see their accounts balance drop.
Despite the danger, the profits are extremely attractive to traders. They always defy, find ways to trade at this time. So in this article, I will provide useful information in detail about the news-based trading strategy that can help you make high profits with low risk.
What is the News-based trading strategy?
News trading is a method based on information in economic reports. Every day, there are many economic reports of countries around the world are published. These reports can have a huge impact on the rates of currency pairs and provide us with many trading opportunities.
News can be classified into 3 categories as follows.
- Periodic news is released regularly such as interest rate announcements by Fed and other central banks.
- Unexpected news includes information that pops up unexpectedly such as terrorist attacks or territorial disputes, politics, war… Unexpected news is often more unfavorable than favorable.
- News that can be specific to a currency has a wide impact on the market.
What economic reports can have a strong impact on the market?
Not all economic data impacts the market equally. Usually, the US economic data has the most influence on the market. The USD trading volume accounts for more than 85% of the total daily currency transactions.
Here are some key economic data that news traders should keep an eye on:
– Decisions on interest rates of central banks.
– Inflation data
– Unemployment Rate
– Retail Sales
– Industrial production index
– Purchasing Managers’ Index (PMI)
The impact of economic data on the market usually occurs 1 hour before and after the news release. However, its effects can persist for days or even weeks afterward.
How to start trading on news?
To start trading on the news, you will have to use an economic calendar. If you do not know how to see the announcement time in Olymp Trade, you can refer to the following article. https://olymptradeclub.com/how-to-read-the-economic-calendar-at-olymp-trade/
Next, choose a trading strategy. Here are two strategies commonly used by news traders.
Predict market results and direction. Traders will use previously published reports to predict the outcome of an upcoming economic data release. Then place orders based on their simulation.
Trade according to the results of economic data. Traders will wait until economic data is officially released. Then place orders based on the market’s reaction to that economic data.
The second strategy is more commonly used because most traders don’t know or have enough data to analyze and predict the results of economic reports before they are published.
The pros and cons of News-based trading strategy
The news-based trading strategy has its good points and bad points as follows.
- Know in advance when to trade
- Short trading time
- Know your trading results soon
- Have to deal with strong market volatility.
- Slippage may occur.
- Spreads can be heavily stretched.
Major currency pairs (e.g. EUR/USD or GBP/USD) are often used by traders because of their high liquidity and low spreads.
Above are some sharing on news-based trading strategy. Like it or not, the market is always influenced by news or reports that come out every day. Therefore, to trade better, you should pay attention and learn about the news before entering the market.
Be aware that this method is quite risky and not suitable for everyone. Therefore, consider carefully before starting to trade on the news. It is especially advisable to only trade with funds that you can afford to lose.
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