Forex News Trading

Economic news releases often evoke strong moves in the currency market, creating a lot of short-term trading opportunities for breakout traders.

However, not all news reports are tradable. Some of them may not have significant effect on the market while others do. So, before deciding on trading the upcoming news traders may want to find out whether the news is worth trading or not. Traders can find about the significance of the news by looking at the economic calendar's special features, such as, for example, marking all important news in red.

There are two general approaches to trade news:

1 — By "guarding" the breakout channel

Traders simply set Buy and Sell limit orders on both sides of a price channel, so when the news comes out one of the orders will probably be hit. Although this method is very simple, it also carries real risks of potentially hitting two orders: Buy and Sell as the market is shaken by the news report. In such "double-hit" situation traders will face losses on one or sometimes even both trades.

2 — By actually analyzing the data

Traders can predict most probable outcome of the news by looking at such economic calendar fields as: "Forecast" and "Previous". Figures in those fields can give an idea about the current situation.

Then, traders would watch the news report and pay attention to the actual numbers released. If the numbers come as a surprise — means they are not close to what was expected / forecasted, then traders would consider opening trading position regarding to the situation. If the data carries positive surprise — they would open Long position, negative — Short. This news trading requires more attention from traders, but is also more effective as it carries lesser risks.

When are economic news released?

What you should know about trading the news in Forex

1. Even if you do not trade news it is important to know about the date and time the news are due, to be able to prepare to possible short-term extreme market conditions. Some traders, actually, prefer not to trade at all during economic news releases.

2. The fewer the price moves before news releases (when it may seem like everybody has abandoned trading), the greater is a potential for the market to burst out after the news report.

3. Breakouts following the economic news reports exist for very short period of time — from several minutes to several seconds — it is a first reaction of the world to the news.

4. Generally, if the news did not carry any "surprises" — unexpected data — there will often be no significant reaction in the Forex market.

Sourcing:
http://www.forex-fundamental-analysis.com

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Forex Economi Indicator

What moves EUR/USD?

US economic indicators by Rank:

1. US Non Farm Payroll — measures new jobs created in States.

2. Interest rates — FOMC rate decisions.

3. US Trade Balance, European Trade Balance — a proportion between exports and imports in US economy.

4. U.S. Current Account 

5. US Treasury Inflow Capital (TIC) Data — a measure of how much foreign buying of country's securities takes place.

6. US Gross domestic product (GDP) — a measurement of growth in economy.

7. Federal Open Market Committee (FOMC) Rate Decisions — data about changes in currency rates.

8. US Retail Sales — a measure of strength of consumer expenditure. 

9. Consumer price index (CPI) — a measure of inflation in Europe.

Note, that because the US dollar is involved in over 80% of all currency trades, US economic data tends to be the most important in the Forex market.

What moves USD/JPY?

Besides US economic indicators, there are important data of Japan economy with its indicators:

Bank of Japan Monetary Policy Meeting — decides on measures to preserve strength of the currency.

Japanese Trade Balance — Japanese imports versus exports.

Gross domestic product (GDP) — growth in an economy.

Consumer price index (CPI) — a measure of inflation.

Industrial production index — a measure of activity in the Japanese manufacturing sector

Retail sales — a measure of strength of consumer expenditure.

Tankan report — assessment of Japanese business conditions: proportion of "optimistic" businesses to "pessimistic" ones.

Unemployment rate

Fundamentals for GBP/USD

All US economic indicators should be watched plus:

UK Housing Prices — number one indicator for Pound, UK Housing Prices are primary gauge of inflation in the UK.

Bank of England Meeting — provides an outline of monetary policy and changes to currency interest rates.

UK Unemployment rate

UK Retail Sales

Sourcing:

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How to read Forex Economic Calendar

Impact factor — suggests how much influence current economic data is expected to bring along.

It is important to know the time of High impact data release if you trade affected currency pair.

During actual news release market becomes volatile. The strength of the volatility depends on the "factor of surprise" brought in the news.

"Factor of surprise" can be defined as a level of unexpectedness, where traders compare Forecast data to Actually released data.

Medium impact economic data should also be kept in mind in case the factor of surprise turns to be high. Low impact data most of the time do not shift Forex market significantly.

Column Previous in Forex Calendar — provides data from last release.

Column Forecast indicates numbers that economists are predicting and expecting for the upcoming release today. 

Column Actual is updated only after the data is out. At the very second when data becomes available it is instantly compared against Forecast values, and depending on overall positiveness or negativeness of the news for the currency plus taking into consideration the factor of surprise, price dips or rises in a matter of seconds.

Economic News impact — increased market volatility — usually lasts for 1-3 minutes (highest volatility); next 5-10 minutes market experiences corrective/adaptive volatility, where price settles in summarizing new market shift.

Sourcing:

http://www.forex-fundamental-analysis.com

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Forex Fundamental Analysis. Basics

What is fundamental analysis?

Fundamental analysis in Forex is a type of market analysis which involves studying of the economic situation of countries to trade currencies more effectively.

It gives information on how the big political and economical events influence currency market. Figures and statements given in speeches by important politicians and economists are known among the traders as economical announcements that have great impact on currency market moves. In particular, announcements related to United States economy and politics are the primary to keep an eye on.

What is economic calendar?

Economic calendar is created by economists where they predict different economics figures and values according to previous months. It contains next data: 

Date — Time — Currency — Data Released — Actual — Forecast — Previous

For example: If the forecast is better than the previous figure, then US dollar usually is going to strengthen against other currencies. 

But when news are due, traders have to check the actual data.

If to look at oil prices, a rising price will result in weakening of currencies for countries which depend on huge oil import, e.g. America, Japan.

A good example of detailed economic calendar can be found here: Forex Economic Calendar

Whose speeches to keep an eye on?

Chairman of the Federal Reserve Bank of USA, Secretary of the Treasury, President of the Federal Reserve Bank of San Francisco and so on. Speeches of those prominent people are watched closely by traders.

What are the most powerful figures that move Forex market?

Interest rate
Traditionally, if a country raises its interest rates, its currency will strengthen because investors will shift their assets to that country to gain higher returns.

Employment situation
Decreases in the payroll employment are considered as signs of a weak economic activity that could eventually lead to lower interest rates, which has negative impact on the currency.

Trade balance, budget and treasury budget 
A country that has a significant Trade Balance deficit will generally have a weak currency as there will be continuous commercial sellings of its currency.

Gross Domestic Product (GDP)
GDP is reported quarterly and is followed very closely as it is a primary indicator of the strength of economic activity.
A high GDP figure is usually followed by expectations of higher interest rates, which is mostly positive for the currency.


Less powefull economic indicators are:
Retail sales
It is the first real indicator of the strength of consumer expenditure.

Durable goods 
Rising Durable Goods Orders are normally associated with stronger economic activity and can therefore lead to higher short-term interest rates, which is usually supportive for a currency.

How do traders use all this?

There are few useful tips that can be followed:
1. Keep an economic calendar on hand. Watch for the events when data are due to be released.

2. Know what indicator is gaining the most of attention at any given time as it becomes a catalyst for future price moves. For example, when the U.S. dollar is weak traders will watch closely the inflation indicator.

3. When the difference between the expectations and real results occur, watch for corrections in the market price moves.

4. Pay attention to news revisions if any, the situation on the market can change quickly.

Another important thing to consider — your Forex Broker!

Because of the high volume of trades made at the time of important economic announcements some brokers may block or slow down the execution of new trading orders.

For traders it means they should enter the trade before the "major action" begins and, what is more important, they must always have their protective stops placed. Being not able to access the trade desk to close your losing position in time is the most frustrating thing traders should always try to avoid.

Sourcing: 
http://www.forex-fundamental-analysis.com

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