Part VI. News Impact
Commander in Pips: Financial and political news are extremely important for the Forex market. That’s why despite how small a broker is, it usually has online FX news update via the trading terminal or on its website. The point is that news moves markets – news changes fundamentals, and they, in turn, change price. One of the major components for profitable trading is information. Since you also want to make as much profit from your trading as possible, you also have to deal with information. But how – it’s too much information and they are very different. You will have to spend all day just to catch it, but when we can trade then?
Successful traders are not prophets, they can’t foresee the future, but they have some kind of a filter that lets them drive inside the huge flow of news, events and information. This filter saves their time and lets them extract from thick blur flow of information those pieces of news that are really important and could be useful currently to make proper trading decisions.
Pipruit: Well, that’s great, but before separate something, I need to find information sources. Where I can find information at all?
Web and TV sources
Websites are our primary recommendation as a source of news and information, especially for a newbie trader. You can find some sites where appearance of news is rather fast and sharp, also there could be particular trade recommendations, analysis, discussion of this or that event or news etc. For instance, ForexPeaceArmy.com has daily prerelease information on tradeable news events, a news calendar, and more.
Although there are a lot of different news providers, it is better to stay with the leaders, such as CNBC, Bloomberg on TV, Reuters, Wall Street Journal and Market Watch. Their advantage is that they have a lot of contacts with really big persons that they could invite onto TV. Their reputation is sufficient and for some persons, it even could be an honor to share with his view on some news or event on live translation. Even such guys as Buffet, Gross, Soros and others will not nix their invitation. Thanks to that, you can get more in-depth view on some news. Second, they show you news very fast, almost in real time, no matter what they are – non-farm payrolls release or live Bernanke speech. Then even more, you will be able to listen to commentary and opinion on some particular event from well-known managers and traders.
Bloomberg and Reuters also have websites where you can read news and watch some parts from TV translations.
If you decide that this is not enough for you – very well. It means that probably you already have 100K+ of assets and ready to pay for really superb software. But be ready to pay 800-2000$ per month, depending on what you particularly need. Think twice before paying that money. Still, for example, Bloomberg will give you total flow of news, all historical data on any macro data with the possibility to separate, tune and choose only necessary news, real-time access to all markets, trading through software, all data to all companies’ financial statements etc. In other words – you will give all that you ever could imagine, and all this stuff online and real-time.
Macro data, so as central bank meetings and rate decisions usually happens not occasionally but strictly in accordance with some schedule. This schedule calls Economic Calendar. It shows for some time in the future date and time of release, what number is expected, and what number was during previous release and was it revised or not. Some calendars also have short description of macro data. For instance, yahoo calendar: Economic Calendar: Financial Calendars - Yahoo! Finance But this one is dedicated to US only.
Also we can recommend our calendar at the FPA - - Current Economic Events & Forex News Calendar that we make day by day not only for the US but for all macro data that should be released during today’s trading session. Also we have particular trading recommendations, depending on the fact number and how it will be different from expectations here:
Current Forex Trading Signals
and descriptions of different macro statistics:
Economic Indicator Descriptions
So this is a huge help to traders, since they are planned for some months forward and you know what particular event will be released with certainty. Don’t forget to update the time zone, just to not miss it! They are extremely important since you may get information about the market’s expectation on some data, and be prepared for its release in time. Data, as a rule leads to short-term price movement right after and even right before the release as to some move in medium term perspective, when investors put that data in some fundamental overall picture.
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!
5 years ago,
Fundamental analysis seems complex than I think.
Table of Contents
- FOREX - What is it ?
- Why FOREX?
- The structure of the FOREX market
- Trading sessions
- Where does the money come from in FOREX?
- Different types of market analysis
- Chart types
- Support and Resistance
Candlesticks – what are they?
- Part I. Candlesticks – what are they?
- Part II. How to interpret different candlesticks?
- Part III. Simple but fundamental and important patterns
- Part IV. Single Candlestick Patterns
- Part V. Double Deuce – dual candlestick patterns
- Part VI. Triple candlestick patterns
- Part VII - Summary: Japanese Candlesticks and Patterns Sheet
- Part I. Mysterious Fibonacci
- Part II. Fibonacci Retracement
- Part III. Advanced talks on Fibonacci Retracement
- Part IV. Sometimes Mr. Fibonacci could fail...really
- Part V. Combination of Fibonacci levels with other lines
- Part VI. Combination of Fibonacci levels with candle patterns
- Part VII. Fibonacci Extensions
- Part VIII. Advanced view on Fibonacci Extensions
- Part IX. Using Fibonacci for placing orders
- Part X. Fibonacci Summary
Introduction to Moving Averages
- Part I. Introduction to Moving Averages
- Part II. Simple Moving Average
- Part III. Exponential Moving Average
- Part IV. Which one is better – EMA or SMA?
- Part V. Using Moving Averages. Displaced MA
- Part VI. Trading moving averages crossover
- Part VII. Dynamic support and resistance
- Part VIII. Summary of Moving Averages
- Part I. Bollinger Bands
- Part II. Moving Average Convergence Divergence - MACD
- Part III. Parabolic SAR - Stop And Reversal
- Part IV. Stochastic
- Part V. Relative Strength Index
- Part VI. Detrended Oscillator and Momentum Indicator
- Part VII. Average Directional Move Index – ADX
- Part VIII. Indicators: Tightening All Together
- Leading and Lagging Indicators
- Basic chart patterns
- Pivot points – description and calculation
- Elliot Wave Theory
- Intro to Harmonic Patterns
- Divergence Intro
- Harmonic Approach to Recognizing a Trend Day
- Intro to Breakouts and Fakeouts
- Again about Fundamental Analysis
- Cross Pair – What the Beast is That?
- Multiple Time Frame Intro
- Market Sentiment and COT report
- Dealing with the News
- Let's Start with Carry
- Let’s Meet with Dollar Index
- Intermarket Analysis - Commodities
- Trading Plan Framework – Common Thoughts
- A Bit More About Personality
- Mechanical Trading System Intro
- Tracking Your Performance
- Risk Management Framework
- A Bit More About Leverage
- Why Do We Need Stop-Loss Orders?
- Scaling of Position
- Intramarket Correlations
- Some Talk About Brokers
- Forex Scam - Money Managers