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Posted on Jun 16, 2020 at 04:46 PM
In one of our monthly “Online Traders Forum”, a rookie trader asked this pressing question: “Should you pay attention to Forex news or completely ignore it?” That’s the question we’re going to tackle in this article.
By the time you finish this rather short post, you’ll have an entirely new understanding of how to approach news events.
As a quick disclaimer, this won’t be agreeable to everyone. For those with a fundamental edge to their trading, the methods and concepts I discuss here may not apply.
With that said, if you want to rely solely on pure technical analysis as I do, then this post is for you.
For your information, I analyse & trade the news every single month.
You’ve heard of them before… Non-farm payroll, CPI, PPI, CB Governors’ statements, Central Bank press conferences and even Interest Rate decisions.
You name it, I trade all of it.
And you know what’s even more surprising?
I do it all by reading & watching Forex news in conjunction with my technical analysis.
Definitely, I know when high-impact events are scheduled because it’s public information. This allows me to organize my trading activity in a way that doesn’t put me at risk for adverse reactions.
But I never always use the result of an event to form an opinion about the market.
Or do I?
You see, when it comes to trading the news, there are three categories of traders.
The first are those who obsessively watch the result of, say, a Non-Farm Payroll (NFP) report or Interest Rate decision. With this information in hand, they pull the trigger without delay.
The second category includes the traders who run ahead of the news. These traders attempt to outsmart the market by buying or selling ahead of a high-impact event.
The third category, which I’m a part of, use the resulting price action to affirm their Technical Analysis.
We (trend traders) sit on the sideline and wait for the dust to settle. Then once the noise is gone, we swoop in on the mid-level time frames and make our trade decision.
And it doesn’t have to compulsorily be a buy or sell. Once the dust settles, we’re often left with a whole lot of nothing, which means we do nothing.
Make no mistake; we’re still trading the news. A 50-pip spike or pin-bar that develops at support due to a surprise rate hike is just the manifestation of the event itself.
So, if we buy that spike pin-bar, we’re technically buying the result of that surprise NFP data.
See what I mean?
The difference in trading performance over an extended period is simply a measure of time.
To stand a chance in this business, you want to be in the third group.
Got any questions so far? Leave them in the comment section below.