Economic data is a very important catalyst in all financial markets, but particularly so in the forex market. This market responds to most global news releases. With the major currencies and combinations thereof, traders always some piece of forex news that will affect their strategy and method. There are often more than seven various news releases published on a daily basis. Choosing to trade with forex news opens many opportunities for traders.
This may sound quite easy to do, but it is not. Not only is the reported data important, but the whispered and revised data is as important. Some of the releases, depending on the significance of the source country in the market, will impact the forex market more than other forex news.
When are the Releases Published?
The release times and dates depend upon the country that is affected. You should maintain an updated forex calendar which will allow you to keep up to date with the relevant dates and times related to your currency pairs.
Forex news traders must be aware of the releases that are due at least one week in advance. You also need to know the data announcements that are due for release. The important data releases for the global countries include:
- Producer and consumer price indices
- Interest rate settings
- Industrial production
- Surveys related to consumer confidence
- Surveys related to manufacturing
- Retail sales
- Unemployment levels
- Surveys related to business sentiment
- Balance of trade
The level of important for these releases is very dependent on the country’s economic climate at the time. This shows that you need to be aware of where the market focus is at any point in time.
Length of Effect
The forex market may react to the news for hours or sometimes for days after its release. The effect normally resonates within the market for a day or two after the release. However, the impact of the news may last for around four to five days.
How to Trade Forex News
A popular method of trading the news is to locate the consolidation period prior to a large number and trade using that number. This type of trade is possible on a daily or short-term basis. Forex news trading is particularly difficult because the markets are so volatile.
To enable effective forex news trading, it is necessary for you to keep abreast of all the possible news releases that may affect your trading pattern. If you do not remain alert and active, this could become a very complicated strategy to implement and use effectively. The forex market is subject to quick ups and downs and relevant news announcements may enhance this fluctuation.
You have to ascertain the most important releases for your currency pairs. You should not take the news at face value only, but combine it with the country’s present economic and political climate and determine if the news piece will affect the currency detrimentally or not. You can use the volatility of certain news announcements to your advantage, but it requires that you watch the market closely and enter at the correct time.