News Trading is one of several trading styles that utilized scheduled news release as momentum to enter the market. This method has triggered several untrue stories around the net.

News Trading is one of several trading styles that utilized scheduled news releases as momentum to enter the market. Due to its circumstances, this method has triggered several untrue stories around the net. In this article, we are going to expose two of them.

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Get Rich By Trading The News Once A Month

There is actually a tip on the net that said, you simply have to open trade on the first Friday each month, place a trap, and then wait for US Bureau of Labor Statistics to publish their unemployment report that includes Non Farm Payroll (NFP) data. EURUSD following the release of NFP is said to move 150-250 pips. By trading at that time, the myth said that you could get the most effective profit.

It sounds so easy, but too bad, that is just a myth.

Price swings could be as high as 250 pips or more following NFP release, but more often than not, price swing is simply around 100 pips. There were even times when price won't be budged, simply because investors think that the data will not matter in the bigger picture. In addition, it is quite difficult to predict whether the data will show decline or improvement, and what will the market things about that. Even experts have sometimes missed it. To bet your funds on such uncertainty is not right. You could do better by diligently 'scalping' the chart.

 

You Don't Have To Follow The News To Trade The News

The second myth said that in order to do news trading, you don't have to follow the news everyday. You just have to know consensus estimates/the last recorded data/seasonal cycle/etc. This is newbie's mistake. Consensus estimate does not always come true, and seasonal cycle is sometimes overrated. And who said that if unemployment this month reduced, then in the next month it is impossible to worsen? Even in the best of times, it is possible for unemployment to worsen because of temporary events such as bad season or tax hike.

News trader has to follow the news; it is practically a given. Observing the news related to currencies is a must for forex traders. Even forex trader who uses technical analysis is advised to frequently check on fundamental calendar to avoid collision and keep track of the news to observe fundamental changes on the market. It is always good to know why the market moves to a certain direction, and not the other one. Just because you do your trade once or twice a month, does not mean that you could disregard the news. It is precisely because you trade the news, that you have to follow it closely.

Risk factor in the market has been rising lately. Too many unexpected factors has come in to play; particularly extreme weather and escalated geopolitical conflicts. Traders have seen price movements on the chart drastically bounced from one direction to the other and vice versa due to unscheduled fundamental factor, in addition of economic uncertainty in the US, Europe, Japan, and China. To trade the news at these times, one need to have a strong heart and a strong money management.

Forex news trading is as uncertain as any other trading styles. Your ability to gain profit by using this method also depends on your experience and skill. Therefore, just in any other strategy, success is achieved through diligence and disipline. There are no shortcut to success in forex trading.