How To Trade Forex When Releasing Economic Data
It is common knowledge that one of the advantages of forex trading is a forex market that is open 24 hours a day (starting Monday at 6 am to 4 pm). The release of economic data also tends to be one of the most important catalysts of short-term price movements in any market. The forex market, not only responds to US economic news, but also news from around the world.
At least eight major currencies are available for trading in most of the forex brokers and more than 17 of its derivatives, there is always some economic data that is scheduled for release. This news release can be used by traders to take entry position. Generally, no fewer than seven economic data are released daily from eight major currencies or the most followed countries. So for those of you who choose to trade news (when news releases), there are many opportunities.
Here are the eight major currencies:
U.S. Dollar (USD)
British Pound (GBP)
Japanese Yen (JPY)
Swiss franc (CHF)
Canadian Dollar (CAD)
Australian Dollar (AUD)
New Zealand Dollar (NZD)
As you can see from this list, all of these currencies can be easily traded and cover the whole world. This means you can choose the currency and economic release that you pay special attention to. However, as a general rule, because these currencies are paired with the US dollar, are on the “other side”, then by 90% of all currency trading, the release of the US economy is likely to have the most prominent impact on the market.
Trading News or trading when the news release is actually more difficult than it sounds. You are required to view and compare the value of the analyst’s consensus with the actual value as well as the revision value. Especially if released at the same time, some data releases are more important than others and each must be measurably significant to the country that released the data.
Trading News can be done by traders by paying attention to the schedule of data or economic news was released. Here are the estimated time of data release or the most important economic news for each country. This is also the time when you should pay more attention to the market if you are planning trading news.
When you are trading news, what you should know first is which release is really expected or awaited this week. Secondly, you should know which data is important. In general, this is the most important economic release for each country:
- Central bank interest rate decision
- Retail sales
- Inflation (consumer price, CPI or producer price)
- Unemployment (labor data)
- Industrial production
- Business sentiment survey
- Survey of consumer confidence
- Balance of trade
- Survey of the manufacturing sector
Depending on the current state of the economy, the relative importance or influence of this release may change. For example, the unemployment rate may be more important this month than the decision on interest rates or interest rates. Therefore, it is important to keep an eye on what is the focus of the market today.
How is the effect on the price?
The market will move significantly if the released data have a significant influence on the (economy) of the country. The market can still react to news releases within hours, or it can take days, after its release. A study of the effect of the release of economic data found that the impact of actual results released data generally occurs on the first day and or second, but the impact can still be felt until the fourth day. The impact on position order flow, on the other hand, is still strongly felt on the third day and can still be observed on the fourth day.
If you are facing the release of economic data for some of the data described above, then you should note the hours of release and note the price movements according to the currency pair of the country concerned. Once you understand the effect then you are ready to trade news or trading when the release of data or economic news.
Please be aware, if there is a significant up or down movement, do not rush to take a reversal position because the impact can be up to the fourth day.