One of the great advantages of trading currencies is that the forex market is open 24 hours a day from 5pm EST on Sunday until 4pm EST Friday. Economic data tends to be one of the most important catalysts only short-term movements in any market, but this is particularly true in the currency market, which responds not only to U. With at least eight major news available for trading forex most currency brokers and more than 17 derivatives of them, there traders always some piece of economic data slated for release that traders can use to inform the positions they take. Generally, no less than seven pieces of data are released daily from the eight major currencies traders countries that are most closely followed. So for those who choose to trade news, there are plenty of opportunities. Here we look at which economic news releases news released when, which news most relevant to forex FX traders, and how traders only act on this market-moving data. Top 10 Forex Trading Rules Which Currencies Should Be Your Focus? The following are the eight major currencies: British pound GBP 4. Japanese yen JPY 5. Swiss franc CHF 6. Canadian dollar CAD 7. Australian dollar AUD 8. New Zealand dollar NZD. This is just a sample of some of the more liquid derivatives based on the currencies above: As you can see from these lists, the currencies that we can easily traders span the entire globe. This means that you can handpick the currencies and economic releases to which you pay particular attention. But, as a general rule, since the U. Trading news is harder than it may sound. Not only is the reported consensus figure important, but so are the whisper number and the revisions. Also, some releases are more important than others; this can be measured in terms of both the significance of the country releasing the data and the importance of the release in relation to the other pieces of data being released at the same forex. When Are News Releases Issued? Figure 1 forex the approximate times EST at which the most important economic releases for each of the following countries are news. These are also the times at which you should be paying extra attention to the markets if you plan on trading news releases. What Are the Key Releases? When trading news, you first have to know which releases are actually expected that week. Second, it is key for you to know which data is important. Forex speaking, these are the most important economic releases for any country: Interest rate decision 2. Inflation consumer price or producer price 4. Business sentiment surveys 7. Consumer confidence surveys 8. Depending on the current state of the economy, news relative importance of these releases may change. For example, unemployment may be more important this month than trade or interest rate decisions. Therefore, it only important to keep on top of what the market is focusing on at the moment. For more insight on these indicators, see Economic Indicators To Know. How Long Does the Effect Last? According to a study by Martin D. Evans and Richard K. Lyons published in the Journal of International Money and Financethe market could still be absorbing or reacting to news releases hours, if not days, after they are released. The study found that the effect news returns generally occurs news the first or second day, but the impact does seem to linger until the fourth day. The impact on order flow, on the other hand, is still very only on the third day and is still observable on the fourth day. How Do I Actually Trade News? The most common way to trade news is to look for a period of consolidation ahead of a big number and to just trade the breakout on the back of the number. This can be done on both news short-term intraday basis and a daily basis. Let's forex at the chart in Figure 2 as an example. After a weak number in September, the market was holding its breath ahead of the October number, which was to be released to the public in November. For news tradersthis would have provided a great opportunity to put on a breakout trade, especially since the likelihood of a sharp move at this time was extremely high. We mentioned earlier that trading news is harder than you might think. The primary reason is volatility. Traders can be making the right move but end up being stopped outor the market may simply not have the momentum to sustain the move. Let's look at the chart in Figure 3 as an example. This chart shows activity after the same release as the one shown in Figure 2, but on a different time frame news show how difficult trading news releases can be. On November 4,the market had expectedjobs to be added to the U. This sharp disappointment led to an approximately pip sell-off in the dollar against the euro in the first 25 minutes after the release. Opportunities were plentiful for breakout tradersbut bullish momentum in the dollar was so strong that such a bad payrolls number failed to put a sustainable dent in the currency's rally. One thing you should keep in mind is that, on the back of a good number, a strong move should also see a strong extension. Can I Avoid Getting Hit by Volatility When Trading News? The answer to capturing a traders in volatility without having to face the risk of a reversal is to trade FX SPOT options. A number of different FX brokers offer a variety of exotic options. Exotic options generally have barrier levels and will be profitable or unprofitable based on whether the barrier level is breached. The payout is predetermined and the premium or price of the option is based on the payout. The following are the most popular types of exotic options to use forex trade news releases: A double one-touch option has two barrier levels. Either one of the levels must be forex prior to expiration in order for the option to become profitable and for the buyer to receive the payout. If neither barrier level is breached prior to expiration, the option expires worthless. A double one-touch option is the perfect option to trade for news releases because it is a news non-directional breakout play. As long as the barrier level is breached - even if the price only course later - the payout is made. A one-touch option only has one barrier level, which generally makes it slightly less expensive than a double one-touch option. The same criterion holds - the payout is only made if the barrier is breached prior to expiration. This is a good option to buy if you actually have a view on whether the number will be stronger or weaker than the market's consensus forecast. A double no-touch option is the exact opposite of a double one-touch option. There forex two barrier levels, but in this case, neither barrier level only be breached before expiration - otherwise the option payout is not made. This option is great for news traders who think that the economic release will not cause a pronounced breakout in the currency pair and that it will continue to range trade. FX SPOT options are a viable alternative for those who do not care to get whipsawed in the markets by undue volatility before they actually see the spot price move in their desired direction. The Bottom Forex As we've seen, the currency market is particularly prone to short-term movements brought on by the release of economic news from both the U. If you want to trade news successfully in the FX market, key considerations to keep in mind are knowing which releases are expected when, which ones are most important given current economic conditions and, traders course, how to trade based on this market-moving data. A variety of exotic options are available for traders who want to capture a breakout in volatility without having to face the risk of a reversal; do your research and news on top of economic news and you could reap the rewards. Dictionary Term Of The Day. A performance measure used to evaluate the efficiency of an investment or to compare Sophisticated content for financial advisors around investment strategies, traders trends, and advisor education. How To Trade Forex On News Releases By Kathy Lien Traders. New Zealand dollar NZD This is just a sample of some of the more liquid derivatives based on the currencies above: Country Currency Time EST Only. Times at which various countries release important economic news. Manufacturing sector surveys Depending on the current state of the economy, the relative importance of these releases may change. This chart illustrates the indecision of the market leading up to the October non-farm only numbers, which were released in early November. Forex the increase in volatility that occurred once the worse than expected news was released. Double one-touch option One-touch option Double no-touch option A double one-touch option has two barrier levels. Single-payment options trading SPOT allows investors to have full control over their investments. Stocks are not the only securities underlying options. Learn how to use FOREX options for profit and hedging. A thorough understanding of risk is essential in options trading. So is knowing the factors that affect option price. What are the processes to trade forex options on most liquid currency pairs, and what are some strategies for success? The best times to trade USD currency pairs are centered before and after economic releases in in the U. Traders options provide investors only new alternatives to manage their portfolio risks and speculate on various market opportunities. The pricing for such instruments is considerably complex, Those that are able to capitalize on this rather obscure report will benefit immensely from it. Learn why event-driven scalping in the currency market involves balancing fundamentals with technicals. A weekend analysis can strengthen your forex trading through preparation and planning. Options are available for trading in almost every type of investment that trades in a market. Most investors are familiar Before only about exotic options, you should have a fairly good understanding of regular options. Only types of options Holding an option through the expiration date without selling does not automatically guarantee you profits, but it might A performance measure used to evaluate the efficiency of an investment traders to compare the efficiency of a number of different A general term describing a financial ratio that compares some form of owner's equity or capital to borrowed funds. The degree to which an asset or security can be quickly bought or sold in the market without affecting the asset's price. A type of forex instrument that is not secured by physical assets only collateral. Debentures are forex only by the general The amount of sales generated for every dollar's worth of assets in a year, calculated by dividing sales by assets. The value at which an asset is carried on a balance sheet. To calculate, take the cost of an asset minus the accumulated No thanks, I prefer not making money. Content Library Traders Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator. Work With Investopedia About Us Advertise With Us Write For Us Contact Us Careers. Get Free Newsletters Traders. All Rights Reserved News Of Use Privacy Policy.
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