Economic data releases usually evoke volatile movements in the currency market, creating plenty of short-term trading possibilities for breakout traders.
However, not all news reports are tradable. Some of them may not have considerable effect on the forex market while others do. Therefore, before deciding on trading the upcoming news, market traders may need to find out whether the news is worth trading or not. Traders can determine the importance of the news by browsing at the economic calendar's special features, such as, for example, marking all essential news in red.
There are typically two ways in forex news trading. The first is by "guarding" the breakout channel. Traders simply place Buy and Sell limit orders on both sides of a price range, so when the economic data comes out one of the orders will probably be hit. Though this method is very simple, it also carries real risks of potentially triggering both orders as the forex market is shaken by the news report. In such "double-hit" situations, forex traders will face losses on one, or sometimes, even both trades.
The second approach to currency news trading is by precisely analyzing the information. Forex traders can predict the most probable outcome of the news by searching at such economic calendar fields as: "Forecast" and "Previous". Numbers in those fields can give an idea about the expected data that is to come up.
Then, currency traders would keep an eye on the news report and give attention to the actual numbers released. If the numbers come as a surprise, meaning that they are far to what was forecasted, then traders would consider opening a trading position relating to the situation. If the news carries a beneficial surprise, they would open a Long position. And if it is negative, then they open a Short trade position. This news trading requires more attention from traders, but is also substantially more effective as it comes with lesser risks.
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