Let’s continue our study, namely how to trade forex using news as a basis for making a decision whether to open a buy or sell position and how much profit and loss targets.
Forex Trading Method Based on News
But before we go further we need to say again that the formation of technical indicators such as head and shoulders , morning stars , MACD and so on is nothing but a fundamental factor that is always published every certain period that we usually call economic news.
And to find out how important this economic news is, let’s try to consider the following example.
On Monday morning you see the news that the company whose shares you bought went bankrupt.
From the news above what are you thinking about? You must be thinking about the price of your stock, how much money you have lost, right? and what about shareholders’ perceptions.
I am sure most shareholders will compete in session I to sell all their shares and what happens on the market? yes, your company’s stock price will definitely experience a very sharp decline and if you still hold the company’s stock you will definitely go bankrupt.
Now that’s great economic news that can affect price movements in the market. Not only the stock market but also the forex market!
Let’s go back to the example of the economic news above, imagine what if the news about the bankruptcy of your company you have heard the day before the economic news was delivered.Surely you will be able to sell all of your shares first compared to other shareholders. And you will get fewer losses compared to others.
This method is commonly referred to as Insider Trading and is strictly prohibited because it is fraudulent. Usually this information is information obtained from people in the company itself.
But you don’t have to play cheating, the thing you need to do is see the news earlier than other forex traders because almost all traders must focus on this news.
So the point is that a news is able to drive a price in the forex market whether it is positive or negative news. And the thing we need to do is prepare all possibilities (strategies) for the conditions that will be faced and see the news earlier than the other traders and focus more on the news that has a huge impact on price movements.