How News Affect Forex Trading

FX Strategy Articles > FX-guides

In many of our previous articles, you will see how we emphasize the importance of keeping track of developments in the forex market. The reason for this is that market movements, both past and present, could provide clues on how the market will perform in the future.

You will also see that we regularly provide you with updates on major announcements related to forex and the economy all over the world. Plus, we also show you what to expect in the coming week when it comes to upcoming announcements and releases.

All these give you a clue on how important it is to keep track of news if you are trading in the forex market. But how are the two related? We’ll share a few insights with you.

It’s All About Timing

Closely following forex news if you’re a novice trader can help you understand how important timing is. An upcoming major announcement by a central bank, for example, could drive currency trade positively especially when positive news is expected. But if an announcement reveals something opposite to what the market expects, you can expect prices to correct itself by going on a downward trend. What we’re trying to say here is that news gives you foresight so you can come up with a good trading strategy beforehand. Being strategic is definitely better than trading based on how you or the market reacted to a specific piece of news.

What to Look Into

Because of its influence on the forex market, there are several types of news that you need to look closely into. These include changes in interest rates, GDP, and inflation. Also keep watch of major announcements made by big central banks, such as the US, EU, Switzerland, and the UK. One of the reasons you should do this is that these major central banks are closely tied with their respective currencies, which also happen to some of the major currencies in the market. Thus, any news made by financial officials in these central banks would likely affect their respective currencies as well.

There you have it, the relation between news and forex trading. If want to be updated on major announcements in the market, be sure to check out our FX Trading Tips section.

By FX Strategy Team, Published on 22nd of March 2013
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