News trading involves making trades based on the release of economic news or events, such as GDP reports, interest rate decisions, or employment data. The primary goal is to profit from the price volatility that typically follows these announcements.
Identify Key Events:
Use an economic calendar to track important news like Non-Farm Payrolls (NFP), GDP reports, or central bank meetings that can move the markets.
Pre-News Strategy:
Enter trades before the news release, anticipating the market movement based on expectations.
Example: If it's anticipated that the US Federal Reserve will raise interest rates, you might buy USD in anticipation of a stronger dollar.
Post-News Strategy:
Wait for the news to be released and then react based on the market’s immediate response.
Example: If positive US employment data is released (better than expected), you might buy USD as it strengthens.
Manage Risk:
Use stop-loss orders to limit potential losses and avoid excessive risk.
Be mindful of slippage—the difference between the expected price and the actual price when the order is filled, especially during volatile times.
Before News:
Event: US NFP (Non-Farm Payrolls) data is expected to show 200,000 jobs added.
Action: You enter a buy order for USD/JPY, expecting that good employment data will lead to a stronger USD.
After News:
Event: The NFP data shows 250,000 jobs added, which is better than expected.
Action: You buy USD/JPY as the USD strengthens due to the positive data.
Profit from Volatility: News events can trigger sharp price movements, which can present profitable opportunities.
Clear Entry Points: News releases often create direct market triggers, making it easier to spot entry points.
High Volatility: Prices can move unpredictably and rapidly during news events, which can result in significant losses.
Slippage: Due to fast-moving markets, orders may be filled at a different price than expected, especially when liquidity is low or market volatility is high.
Yes, if you are comfortable with fast market reactions and managing risk during volatile times.
Yes, if you’re looking to trade around major market-moving events like economic reports.
FNmarkets offers access to these events through its trading platforms, so you can participate in news trading effectively if you understand the risks and rewards involved.
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