TRADING WITH THE NEWS IN A CHANGING MARKET

Economic news is one of the greatest drivers for short term currency movements in the forex markets or in any market for that matter.  The currency markets respond very easily to economic news coming out of the USA especially, but also news coming from all parts of the world.

Trading this news has become an accepted modus operandi to trade the forex exchange market in recent times. It is almost a regular occurrence to see currency pairs shift 50 to 100 pips within a few seconds after a major economic news release. You are now probably thinking ‘that’s got to be easy money’, maybe it is or maybe it all depends on your preparation in anticipating the news release.

Trading on the release of economic news releases can be a major tool in your trading armory. Some traders only use this particular weapon. Economic news releases regularly stimulate strong short term currency movements, which can be huge trading prospects for breakout traders. As the forex are open 24 hours a day in several time zones, there are plenty of chances, nearly every trading day to grab a lot of pips driven by an economic news release.

The following currency pairs are the most traded and cover the whole planet EUR/USD - USD/JPY - AUD/USD - GBP/JPY - EUR/CHF - CHF/JPY - GBP/USD. So you can cherry-pick the currencies and news releases which you want to concentrate on. However, as a broad rule, because the U.S. dollar is one of the currencies in 80% of all currency trades, U. S. economic news is inclined to induce a marked reaction in the market.

However, trading news is not as easy as it perhaps sounds. Both the consensus number and the revisions that come afterwards are important. Also, some news is more significant than others; its importance depends on the significance of the country where the data is being released and the significance of the news in relation to the other data being released on the same day.

These are the most important economic data that any country can release.

1. Interest rate decision

2. Retail sales

3. Industrial production

4. Inflation as indicated by consumer prices or producer prices

5. Trade balance

6. Unemployment

Surveys related to business, manufacturing and consumer confidence are also important. The comparative importance of the economic data may change. Certain data may be more important this month than other data therefore a trader should keep abreast on what is important to the market at the present time.