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During volatile periods following a news release, the importance of prudent risk management cannot be overstated.
Stops are highly recommended, but in this case, traders may prefer to use guaranteed stops (where available) over normal stops. Guaranteed stops do have a fee, so check with your broker; however, this fee is often insignificant in comparison to the amount of slippage that can occur during such volatile periods.
Traders should also consider reducing their standard trade size. Volatile markets can be a trader’s best friend, but they can also significantly reduce account equity if not managed properly.
As a result, in addition to using guaranteed stops, traders can look to reduce their trade sizes in order to manage their trading emotions.
When developing a forex news trading strategy, traders can take a number of approaches that are dependent on the timing of the trade in relation to the news release.
Many traders prefer to trade in the moment, making decisions as soon as an announcement is made – using an economic calendar to plan ahead. Others prefer to enter the market when it is less volatile, such as before a release or announcement. To summarise, forex news trading falls into one of the following categories:
1. Trading prior to the release of the news
2. Investing based on a news release
3. Trading following the news release
1. Trading before a news release
Trading forex news before it is released is advantageous for traders who want to enter the market when it is less volatile. In general, risk-averse traders gravitate toward this approach, hoping to profit from the quieter periods preceding the news release by trading ranges or simply trading with the trend. Find out how to trade before the news is released.
2. Investing during a release
These forex news trading strategies are not for the faint of heart because they require entering a trade as soon as the When the news is released or in the moments following,
This is the point at which the market is at its generally unpredictable, underlining the significance of having an obvious methodology and chance administration. Prepare yourself with strategies for navigating the volatility of forex news trading at the release.
3. Trading following the news release
Trading after the news has been released entails entering the trade after the market has had time to digest the news.
The market frequently provides clues on its future direction through price action, presenting traders with excellent opportunities.
With our article on exchanging after the news discharge, you can figure out how to exchange the news when the market is experiencing significant change.
THINGS TO REMEMBER WHEN TRADING NEWS RELEASES
- Preparation is key: Do not get lured into suddenly trading the news with the The screen displays rapidly flashing bid and ask prices. Be self-disciplined enough to step back, reassess, and devise a strategy that can be implemented in time for the next major news release.
- Broader spreads: It is normal for spreads to widen during major news releases. Make sure there is enough free margin available to absorb the temporary widening of the spread, which will necessitate a larger margin.
- Volatility: When trading the news, currency market volatility is an important factor to consider. Traders should consider reducing trade sizes and ensuring that stop distances are sufficient to allow for expected volatility while protecting against further downside.
Because currencies trade in pairs, it is critical to be aware of the strength/weakness of the accompanying currency. Data that contradicts expectations tends to have the greatest impact in the market, and these can have the greatest impact on your open trades (good or bad).
Taking a gander at it according to the point of view of a swing broker, you should consider how close the market is to your stop or limit before the news discharge. On the off chance that the market is near both of those levels, it very well might be ideal to leave the exchange right away.
At the point when the market is near the objective, it is better not to gamble an excessive amount to acquire pretty much nothing, and on the off chance that this cost is near your stop, you might need to pick up and move on before they conceivably increment because of slippage.