Forex Fundamentals: Discount the News at Your Peril

Filed under: Learn Forex Trading |

Although I am primarily a trader who uses methods of technical analysis, I still feel that the news should be monitored for any big events that might send volatility into the market. A good place to find out about all of the forex news events is at the Forex Factory calendar at: http://www.forexfactory.com/calendar.php. This tells you about all of the upcoming news events, and also tells you the forecast for the news and the impact of the news event on the markets. These are all basically news events from different countries that are scheduled to take place – all of which are updates on the economies of these countries. If the update is better than expected, then the currency pair associated with that country is likely to gain strength. If it is worse than expected, then the currency pair associated with that country is likely to get weaker (at least in the short term).

 

Forex Factory News Calendar

Now, I do not trade exactly off of these news events, as it is a very difficult and time sensitive thing to do. However, I do try to take note of any significant news events. If I am in a trade at the time, I tighten my stops just in case the news event goes against me. If the event goes as expected, then after that, the stops can be returned to what they were before the event. However, if the event goes against my trade and the currency moves fast, then at least my losses will be mitigated.

 

By way of an example, today, one of the main news stories in the world of forex is the CB Consumer Confidence news release in the US at 3pm (UK time). This is an indicator of consumer spending, and if it is better or worse than expected, it could move the USD markets. Therefore, if you have a trade on a USD pair prior to the event, then it might be a good idea to tighten your stops until the event passes.

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