Trading A Forex News Fade

Posted by admin 06/02/2014 Comments are off 1034 views

forex news

It is a very risky proposition to actually trade the news, and by this I mean, placing trades as the news comes out based on the difference between the actual and the forecast is not recommended, it is a practice fraught with danger. Forex trading at these times is highly risky, the spreads open and there is a big chance that you will be just whipsawed out of the market.

Trade Forex After News Announcements.

There is an advantage of working around the news since it gives you a window of time for trading, we know when the economic announcements will be and which ones affect the forex market most. Often there is a spike in the market as the news comes out, and this can last for anything up to 3 hours, and then more often than not the market will reverse. This is not always the case, some announcements can have a long term impact on the forex markets like an interest rate change, but what we are looking for is opportunities when the market is likely to reverse. What you must remember though that you are not trading the news, you must not change your mind all of sudden and decide to chase the market, this is a sure fire way to lose money. You should disregard the news altogether, and just proceed to chart as normally, the only thing you’re taking from the fact there is a news announcement that it gives you an idea of what times to trade.

Forex News Fade.

When there is a substantial difference in the actual figure compared to the forecast, then you will see an initial spike, sometimes in the expected direction, sometimes not, this is what makes trading the actual announcement so hard. But once the initial move has happened the market will soon slow down and indicate a reversal, and this is the part of the move that we are interested in. Don’t look just plainly for the market slowing down and showing signs of reversal, you need to apply the same due diligence and preparation as you would at any other time or circumstances. The target for your trade is around the area from where the spike occurred, you should also bear in mind the trend, since if the spike was a counter trend move then there is always the possibility that the market will continue to move in your favour well after the initial normalisation of the market.

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