News Trading Strategy
Most significant changes in the Forex market occur as a result of financial, economic, and political news and the market’s reaction to it. One of the most popular strategies is news trading. Every day, a significant amount of news is published, and many traders rely on it as their primary trading strategy.
What is news trading?
Breaking news about equities, currencies, and other markets is used as the foundation for a strategy in news trading. Understanding economic news events and their potential market impact, for example, helps traders in predicting short-term (intraday or multiday) market swings or breakouts. A news trading approach is instrumental in volatile markets. This can be before and after the news release. It can include economic news, corporate announcements (such as results, management changes, and stock splits), and unexpected geopolitical events. Today, social media is increasingly impacting trading tactics as well.
What are the kinds of news that can affect news trading?
In practice, you can use any news as a profitable strategy. There are generally six major sections. And the most essential and sought-after section is one that contains significant global economic events. These are some examples of what they are:
- news regarding changes in the state’s monetary policies
- analytical reports on the country’s economic condition, incoming statistics on the trade balance, GDP, as well as country’s unemployment rate, price indexes, and other data
- news about central banks’ monetary policies
- information on domestic currency interference
- financial market news that connects to the forex market.
What are the advantages?
One of the benefits of news trading is that it can be done automatically or semi-automatically. This means you can use automated trading for this strategy and it is one we recommend.
Forex market activity is highly volatile. Predicting where and when to trade for the best returns may be challenging. Because robot trading may conduct hundreds of trades per second, it has the potential to be a tremendously powerful strategy if correctly programmed. For it to be correctly programmed, you can hire professionals to program it for you. This will save you time and it is especially useful if you are not an expert in this field.
One of the professionals you can use is Yourrobotrader. We’ve heard good things about them. With years of expertise in the financial sector, it is one of the main service providers of programming automated trading systems developed in Germany. They have spent the last seven years assisting investors all around the world in using automated trading to enhance and improve their earnings. Their experts will program and automate your trading technique. The trading robot will then aid you by trading automatically by your trading plan. If you don’t have any programming experience, this is an easy way to start automatic trading.
The reason we feel automated trading is useful to learn is that they remove the emotion from trading. They are suitable for short-term traders. Trading bots conduct transactions more swiftly. They are also available 24 hours a day, seven days a week.
You are also able to use automated trading in prop trading. Just make sure that the prop firm you are trading with supports News Trading and EA. If you want to learn more about this, read our article “Top 3 Prop Firms for Expert Advisors (EA) Trading” in which we rated FundYourFX as the best prop firm for EA trading, as well as news trading.
What are the disadvantages?
One of the most significant disadvantages of news-based trading is that it forces you to join trades too late. If an asset was expected to fall due to a piece of news, by the time you read it and respond to it, the prices may have already dropped, giving you less opportunity to enter in time to make returns.
Another disadvantage is the appearance of seemingly genuine information that turns out to be fake. These fake-outs tend to have relatively short-term effects, hence the name. A lack of information and skill may prohibit an investor from appropriately analyzing news and anticipating the next move. Sometimes reliable news is nothing more than rumors.
Instead of trading solely on news events, one should additionally consider the company’s fundamentals or seek a second perspective based on technical analysis.
Regardless of skill level, news trading has proven to be one of the most popular and trustworthy trading tactics in the market. An example is the Forex market, which is the most vulnerable investing platform since global news influences it heavily. As a result, by learning to use news, traders may avoid various costly trading mistakes and increase their profitability. Indeed, the ability to anticipate and understand the news is what distinguishes an expert trader from a novice.