Trading the news has some distinct advantages over other forms of day trading, time is a commodity that many of us just never seem to have enough of. Many traders have jobs or other commitments and don’t have the ability to be at there computers and trade all of the time.
This is the biggest advantage I see with trading the news announcements, it is that you have specific times to trade and so you can literally plan exactly when and for how long you are going to trade. This is a lot different to a technical trader who has to regularly check their charts for new signals, this requires a much greater time commitment and is not compatible with many peoples life styles and commitments.
To trade the news the first thing you need is a good news source, years ago getting a good news feed was expensive but is now very reasonable and many times free. A lot of the brokers these days have free news feeds with there live accounts and many of these are excellent and released as the news happens.
Now you would only need this style of instant sangbad pratidin service if you are actually trading the breakout of the number. I will give an example of this to clarify my point. In this example I would be trading the Non Farm Payroll Numbers (Change in the number of employed people during the previous month, excluding the farming industry).
The first thing you would do is check your news provider and take note what the forecast is. For this example lets pretend it is ten thousand new jobs are forecast for the month. The whole Idea of trading the news is we are looking to capitalize on a fundamental surprise. So if the news is released and the figure comes out at thirteen thousand well then I would consider the forecast to be fairly accurate and thus no trade.
Now if the figure was to come out at one hundred thousand then this would be a surprise and a very good surprise at that. This would be extremely positive for the US economy so as a news trader you would be looking to buy US dollars. So if you were trading the euro/usd pair you would be looking to get short and sell euros to buy dollars.
It is these sorts of surprises that really tend to see some large moves in the markets and thus some really great opportunities for profits.
Trading breakouts like previously described can be pretty fast paced and is definitely not for everyone, but if you consider the previous scenario but don’t want to capture the breakout you still have plenty of opportunities.
With this surprise the odds are definitely favoring a single direction for that trading session ( US session 8am-4pm). In this example trading the euro/usd dollar you are looking to get short and just buy simply assessing the average daily range of that currency pair you could use your normal system for entries or for that matter any system you are comfortable with trading and look for an entry that meets your criteria and set a profit target for the average daily range.
I will give another example here for clarity’s sake, in this example we are looking at the euro/usd and at this time the average daily range is 150 pips say. So to capitalize on this we would be looking to find an entry according to our rule set and seek to take profits once price has traveled the complete 150 pips for the day or at a minimum set some form of trailing stop to lock in some profits and potentially catch some more if price exceeds the range for the day.
There are so many news announcements that the opportunities are endless, you don’t have to trade them all you can just trade the ones that are convenient if you like. Most trading forums and sites have these news calendars available all the time so just check them out and choose the ones that suit.