Trading forex news should be the simplest method but markets do not behave the same way repeatedly. Markets generally reveal a pattern and give hints for a trader. Good trading news normally creates a risk appetite but the chances of such an outcome are 75 percent. There are institutional traders who bet after news releases as they have huge capital to fall back on unlike retail traders.
The Fundamental and Technical Factors For Forex News Failure
There is a fundamental and technical answer for this problem. The fundamentals suggest that if information was leaked before a news release then the reverse behaviour take place in the forex markets. If such a thing happens, traders will close their position later.
The technical factor is bit more complicated. There are traders who rely on technical analysis only. Thus, if the price nears the major resistance trend line after a news release then traders can decide to sell the product at that point and reverse the markets.
Other Factors For Failure of News Trading
There is a single golden rule in trading forex market that is what cannot go up should go down. This is important during the news release. If a news is supposed to drive the market higher, instead drives it lower then it is time to sell.
There would be numerous explanations of the movement after it happens; still, the money making chance would be lost. Thus it is important using tight stops after a news release and remains prepared for reverse position. If you lose the first trade the other in the opposite would allow a break even.
There are several high risk events that make trading difficult for a trader. Firstly news from the US. Even though good news from the US creates a risk, often they provoke a stricter monetary policy making the US Dollar dearer. The good news in Europe also provoke a stricter monetary policy in the Euro zone, this won’t interfere the growth of the Euro but make it dearer.
Secondly the markets can behave differently due to low liquidity in the forex markets. During bank holidays and beginning and end of the month, the market behaviour is stranger. This happens even on a Monday and Friday. Still, this does not mean the trader should not trade in the opposite direction. Instead of predictions it would be wiser to follow the trends after an event.
Tips to Prevent Trading News Volatility From Hitting You
The solution is to trade forex spot options. Different number of brokers offers different exotic options having barrier levels which can either be profitable or unprofitable based on whether the level is crossed. The payment is preset and the price of the option is based on it. Following are the popular exotic options for trading news releases:
Single touch option
Double touch option
Double no touch option
At the end, there are many common reasons of failure in the market, they include over leveraging, failure to adapt, unaware of current forex news and event and trading in a defensive manner. If one is aware of the mistakes while trading forex and remain disciplined then chances of success in trading is good.
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