Forex news trading strategies

Forex News Trading Strategies

There are two main ways to trade on the news:

1. Following a certain inclination of the market (directional bias)
2. Not following any inclination of the market (non-directional bias)

Let's see what it means.

The directional bias

Have a certain inclination on the market, or directional bias, means that once the news releases you expect the market moves in a certain direction. When looking for trading opportunities in a certain direction, it is always good to know what is the news that drives the market.

Several days or weeks before a major report, analysts try to predict the outcome.As you already know from previous lessons, this result will be different between different analysts, but in general there will be a common result will agree that most of these. This result is called consent .

Once the report is released, the result is that result that appears today .

"Buy on rumors, sell on news"

This is a phrase commonly used in the forex market because many times it seems that when released a report, the motion caused not what the report will lead to believe.

For example, suppose that the forecasts say that the U.S. unemployment rate will rise. Suppose also that last month the unemployment rate was at 8.8% and that the consensus report is the 9.0%.

With a consensus to 9%, all the major market players anticipate a weakening U.S. economy, and therefore, the weakening of the dollar. In particular, these market players will not wait the release of the data, but will begin to sell their dollars right now.

Suppose now that the data on the unemployment rate is released and that have actual 9.0% as expected. At this point, as a trader you may think it is a good time to go short on the dollar. However, you will realize that the market will not go in the direction assumed by you. This is because the big players have already adjusted their positions long before the data came out and could now star already cashing in profits related to it.

But now revisit the example above, but this time suppose that the data released on the unemployment rate 8.0% instead of 9.0% recite. What happens is that on the graph to see a rapid rise of the dollar as the major market players were not expecting such a result.

As the report says something different from these advances, they will try to adjust their positions as quickly as possible.

The same thing would have happened if the figure was 10%, with the only difference being that the price of the dollar would have fallen dramatically. In fact, since the consensus was at 9.0%, market players would sell more dollars because the U.S. economy appeared to be weaker than expected.

In summary then, keeping track of consensus and the current result can be able to better understand what are the news and the reports that are moving the market and in which direction.

The non-directional bias

A more common strategy of trading the news is one that does not include any inclination on the direction of the market (non-bias direction).

This strategy does not consider the bias direction and simply plays on the fact that an upcoming news will cause a strong market movement. This means that once the market has established his leadership, you have to think of a plan to place yourself on the basis of current trends.


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