A news strategy involves trading based on market expectations before and after a news release. Making quick decisions is sometimes necessary when trading on news announcements because the financial markets may be affected immediately. As a result, you will need to decide how to trade the announcement quickly.

 

Forex Trading Based On News

 

Like news about other asset classes, forex trading news can be especially busy before and after big economic events. But there are big differences between currencies and other financial markets when it comes to the kinds of news that are important.

 

Most of the time, macroeconomic news things that happen in the economy as a whole or that affect the economy as a whole is what moves the forex markets the most. In general, forex traders can use economic news to predict how interest rates and monetary policy will change. The value of forex pairs tends to increase when news suggests a more hawkish (aggressive) central bank, whereas news suggesting a more dovish (calm) central bank might cause a currency to depreciate.

 

Forex news trading can have an effect on the currencies of countries that export a lot of raw materials or commodities. This is because the news affects the prices of the main commodities that these countries export. Most of the time, these currencies are called "resource currencies." Things that affect supply and demand can change the prices of goods that affect these currencies.

 

On the supply side, news that suggests there will be less of something can make prices go up, while news that suggests there will be more of something can make prices go down, which can then affect currencies that are linked to it. News about political tensions, wars, terrorism, the weather, economic sanctions, labor relations (strikes), and other things could show changes in supply. Demand-related speculation and pricing are mostly based on many of the same big news stories mentioned above, as well as on reports and forecasts about commodity inventories.

 

How to analyze news for trading?

 

To understand what's going on in the news, you should learn about economic indicators. These are large-scale economic factors that affect all financial markets, whether they're forex, stocks, or indices. Changes in interest rates, inflation, unemployment, or retail income in a certain country are all examples. The financial markets and the economy as a whole are significantly impacted by each of these.

 

When telling traders about recent changes in the markets, economic announcements often mention these things. This can change how people feel about the market, especially if the news is different from what traders were expecting.

 

How long does news stay in the market?

 

According to a study by Martin D. D. Evans and Richard K. Lyons that was published in the Journal of International Money and Finance in 2004, the market could still be absorbing or reacting to news releases hours or even days after the numbers are released.

 

According to the study, the effect on returns usually happens on the first or second day, but it seems to last until the fourth day. On the other hand, the effect on the flow of buy and sell orders is still very clear on the third day and can be seen on the fourth day.