Part VI. News Impact

Pipruit: Well, that’s great, but before separate something, I need to find information sources. Where I can find information at all?
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Pipruit: But Sir - How to structure all this stuff?​

Commander in Pips: Simple.

First, Find good and reliable sources of information. Much better if this will be from well-known and respectable authorities and sources with clear reputation. For instance, the Fed Reserve official website or some forex broker blog.

Second, be sure that you use hot news and not those that were released a couple f weeks ago. You have to find some news provider that shows news accurately and as fast as possible. The easiest way is TV – the Bloomberg channel is a nice choice.

Third, read and listen to opinion of solid traders and market participants. They could shed some light on important events and topics, such as a recent non farm payrolls report, an ECB rate decision or the overall economy.

Fourth, it’s very important to consider the nature of news or event. This could be a rumor, a factual number or even some opinion of a hedge fund manager. Also it could be just a fiction. Previously we’ve discussed that market, in general could be manipulated by rumors and opinions of some great participant, say, rumors about possible intervention of Bank of Japan. If the rumor impacts on overall market sentiment, for instance, most investors expect better than expected GDP before it has been released, then the market already could move due to this expectation. If they will not be confirmed by real number – an opposite move could be really strong, since the market will have to compensate those pre-data appreciation. It counts that large funds and institutional investors stand behind of strong moves on the market. The problem is that you do not have sufficient tools to check it. So what to do?

Try to understand the significance of news releaser – is it Central Bank or government authority economist or just unknown representative of a doubtful forex broker? Is the information built on statistics, numbers, other significant events or this is just a personal view without any basis and so on.

Fifth, create a detailed trading plan that will foresee different scenarios – better than expected, in a row with expectations and worse than expected and how much. Try to find out, does the market show some move with some expectations already or not. What investors tell on TV about expected data, what consensus forecast for that numbers etc… That will allow you to act accordingly with the released data and make a fast shift to one or other part of your trading plan depending on actual number.

Sixth, don’t forget the risk management – stop losses and money management are must!