Two Forex Trading Ways Based on Economic Fundamental News
Previously we already understood how to trade forex based on economic news so on this occasion we will discuss about how to trade forex based on fundamental economic news which is generally divided into two (2) types namely directional bias and non-directional bias .
Directional bias is a way of forex trading that has a purpose like this. You hope that the market will move in one direction for sure just after the economic fundamentals are released. When you are looking for forex trading opportunities with certainty about the direction of movement, the right step is to find out what kind of economic fundamentals can drive prices.
A few moments before the news of economic fundamentals is released, there will be a lot of analysts who will estimate the forecasting numbers to be released as economic news. Because of the large number of analysts who estimate calculations, there will be more and more differences in results but in general the value will not be much different and there will be a value that most analysts agree that we call consensus ( consensus or forecast ).
And when the economic calculation figures are released by the government to the public, this calculation number is referred to as the actual number.
“Buy The Rumors and Sell on The News” is a proverb that is widely stuck in the forex market that is mostly the case, that when news is released the price movements of currency pairs are not in accordance with the actual conditions of the news that you are watching.
As a simple example is as follows, let’s say the average number of unemployed in the US is expected to increase in number. Last month’s data shows that the average unemployment is as much as 7.0% and analyst consensus or forecast is 8.0%.
With consensus or forecast data of 8.0%, most of the big players in the forex market will anticipate this condition (weak US economy) so that the US Dollar will weaken.
So when the consensus or forecast data is released the big players in the forex market will no longer wait for the actual data that will be released by the government to sell the US Dollar against other currencies. They will quickly take positions by removing the US Dollar.
Now let’s say the actual (actual) data the average unemployment in the US released is the same as expected, which is 8.0%.
And as a retail trader we will think that this is a good time to sell US dollars. And we will also open our trading platform and see that the market does not move in accordance with our expectations but instead moves in the opposite direction, which is moving up (in fact many buy US dollars) …. What happened 🙁
This is because the big players had already sold the US Dollar even before the news was released. And most likely they are enjoying the benefits until the news is released.
Okay now let’s change the scenario, it turns out that the actual (actual) data on the unemployment average in the US released is 6.5% and the big players think that the data to be released is not much different from the consensus or forecast data which is 8.0% but it turns out the data the released instead shows the opposite, namely a decrease in the number of unemployed in the US which shows the strengthening of the US economy resulting in a stronger US Dollar.
And the thing you will see is the strengthening of the US Dollar against other currencies in a very large amount and this is not what big players expect based on consensus or forecast data. And when the actual (actual) data is released and the results are much different than expected, the big players will immediately change their trading positions as fast as lightning.
This will also happen when it turns out that the data released is 9.0%, so the US Dollar will weaken against other currencies in a very large amount because the big players will increase the amount of US Dollar sold.
So the most important thing about this trading strategy is to pay attention to consensus or forecast data with actual (actual) data and see the effect on the direction of currency movements.
Non-directional bias is a forex trading strategy that ignores directional bias strategies. Here the thing that is most noteworthy is that fundamental economic news that has a big influence will cause a large shift.
Here we do not care where the direction of movement will occur but the most important thing we are there is when the news is released and we will follow the market movements with the strategies that have been prepared.