The forex market operates round the clock for five days each week. Its standard operating times are from 5 p.m. Sunday until 4 p.m. Friday ET. This is by far the biggest benefit to trading using a forex funded account.
Given that these markets move because of news releases, a trader using the funded trader program will want to keep updated on economic data. It’s this data that often guides the decisions made by traders looking to make short-term trades.
It’s a fact that holds in the currency markets, which are particularly responsive to news around the world. Below, we will look at what forex news releases are, how to trade the news, how to know tradable forex news before their release, and the potential risks of trading news.
What Are Forex News Releases?
Forex news refers to important economic events or reports likely to impact forex trades and currency prices. Typical examples of these include:
- Inflation Reports: These provide details on how prices may be changing and affecting the global economy.
- Non-Farm Payrolls: They’re commonly abbreviated as NFP and refer to a report touching on job creation statistics in the United States.
- Interest Rate Decisions: These are announcements about changes to interest rates announced by Central Banks worldwide.
- Gross Domestic Product: The GDP assists in measuring the economic performance of a given country. These reports are typically announced by the government on a quarterly basis.
Each of these four news events can affect currency prices and impact the trading decisions made by a skilled funded trader. The movements in the FX market can lead to either big profits or losses.
How to Trade the News
As every skilled funded trader knows, there’s no one foolproof way to trade the news. Immediately after a newsworthy event happens, the price will either have a muted reaction or spike in one direction. This is a reaction to the traders digesting the news.
Having known this, you should note that there are three approaches you can use on the funded trader program from Audacity Capital to trade the news:
1. The Slingshot Strategy
If trading in a market that’s highly volatile, your stops could become triggered even before the prices have started to trend. If this happens, your trade will have a disastrous outcome.
The trick will be to establish the support and resistance before opening any position. Use these as your “cut-off points.” You’ll need to use these points to close the trade position the moment the price movements begin to go against your position. Savvy traders using this strategy will make it a point to define their preferred stop-loss positions before the news becomes public.
In this strategy, you’re essentially looking to scale out of a winning position as soon as the market starts to move in your favour. For example, if the prices are moving in your favour but you’re unsure of how long this will last, you can choose to partially close it. Try to repeat this procedure at different levels if the prices continue advancing in the same direction.
2. “Buy the Rumor, Sell on the News”
Also called trading on expectations, this is one of the most popular phrases used by those trading tradable forex. Its popularity lies in the fact that whenever a news announcement happens, the market movements don’t always reflect what you’d expect from the event.
For instance, let’s take it that the unemployment rate in the United States is expected to rise. In the same breath, imagine the same rate in the past month stood at 8.8 per cent, and the consensus for the upcoming report indicates it will rise to 9.0 per cent.
If working with a consensus of 9.0 per cent, it implies that all the players in the funded trader program are expecting the economy to weaken. The result of this happening will be a significantly weakened dollar.
Therefore, looking at these estimates, the players won’t sit around and wait for the Bureau of Labor to release the report. No, they’ll start taking positions early on, which will see them trade their dollars for other currencies way before the true number becomes known.
When it comes to trading on expectations, you must keep an eye on market consensus and the numbers released. That’s the only way to better gauge the direction the market will follow.
3. Trading Spikes
Our last strategy is trading spikes, which will help you trade on crucial news releases such as NFPs. The NFP is an important indicator released by the Bureau of Labor Statistics. The report helps in measuring the number of jobs created in the United States in a month.
Often, this report comes out on the first Friday of each month. It’s not unusual to find these reports sending shockwaves in the forex trades. Considering their effects, many skilled funded traders prefer to wait until an announcement has passed before taking a position.
In short, such traders don’t rush to take up a market position right after the news event. They only trade when they have gained a better understanding of the effect produced by the release.
The table above provides a good illustration of market movements after the release of an NFP report.
How to Know Tradable Forex News Before Their Release
In the fast-paced world of tradable forex, traders need to stay ahead of news releases to make informed trade decisions. It’s the only way to capitalize on market movements. Based on their skill level, traders can use different strategies to position themselves before an event happens.
Some of these strategies include:
- Using economic calendars to take up strategic positions. This may include trying to anticipate the date and time of their release and even looking into historical insights to try and anticipate what might happen.
- Relying on real-time updates from renowned news sources such as CNBC, Reuters, and Bloomberg. You may also want to tap into social media feeds to get instantaneous insights.
- Becoming an active member of community engagement and tradeable forex forums. These forums play a crucial role in discussing market trends and upcoming events.
- Performing technical analysis to predict market movements. Traders may need to use technical analysis to decode trends.
Potential Risks of Trading News
While trading news has its benefits, it also poses certain risks to the skilled funded trader. Examples of potential risks include:
- Spreads may widen
- You may experience price slippage
Conclusion
Using a forex funded account to trade means you need to be aware of the short-term movements that may happen because of news releases and events. If you’re to make the most of these events, there are several considerations you must make. These will include keeping track of when important reports will be released, understanding which events will have the most impact, and knowing how to trade based on their information. By keeping track of important announcements, researching historical insights, and managing your risks correctly, you’ll have a good foundation on how to benefit from news trading. Remember, the markets operate 24 hours a day for five weeks, so planning is crucial to turning a profit on your investment.
If you’d like to learn more about the funded trader program, visit Audacity Capital today to learn how you can become a skilled funded trader.
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