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Forex news trading strategy pdf

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The 1 minute forex news trading strategy is another strategy where you can use to trade currency news. Every month, the currency market has market moving news they are announced from interest rate decisions, to non-farm payroll to employment rates etc Web9/11/ · Not all news is suitable for forex trading. Generally, any of the news releases listed above should be suitable to trade on. The most important news will typically come WebNews Trading Forex Strategy - Free download as PDF File .pdf), Text File .txt) or read online for free. Scribd is the world's largest social reading and publishing site. Open Web1 Minute Forex News Trading Strategy-Learn How to Trade Forex Currency News. Hello Traders, The 1 minute forex news trading strategy is another strategy where you can WebForex is a global, decentralized market used to trade different currencies from around the world. This market is responsible for determining the foreign exchange rates for every ... read more

There are 8 major currency pairs available to be traded at almost every well-established brokerage. These currencies range from the U. dollar to the Japanese yen and the Swiss franc. That means that there are at least 8 countries whose economic data will have a bearing on the forex market.

Therefore, traders are practically guaranteed that there is always some economic data scheduled for release that they can use to inform their trading. Indeed, up to 7 pieces of data are released every weekday that forex traders can use. This abundance of data and constant news releases are why the news more significantly influences the forex markets. The Governor of the Reserve Bank of New Zealand has issued a statement detailing that they will not be cutting interest rates as expected and there will instead be a slight increase in rates.

Since interest rates directly impact the value of a currency, this news will be relevant for forex traders. The unexpected news that there will be no cuts in the interest rates can therefore be expected to increase the value of the New Zealand dollar.

There are certain news releases in the forex market that are referred to as high-impact news. As the name suggests, these news releases tend to have the highest impact on the forex markets, and so traders are well-advised to take notice of them when released. The most important news releases will be the ones that relate to central bank meetings.

To do this, they have several tools at their disposal. One of these tools is the ability to control interest rates. Traders, therefore, keep a watchful eye on central bank meetings to determine whether there will be any change in interest rates in the future.

Forex traders are notorious for rigorously analyzing the monthly statements issued by central banks and have been known to send markets into a spin if the slightest hint of interest rates is cut. Unemployment data is released in several different ways depending on the jurisdiction that you are in. In the United States, the highest impact release is inarguably the US Non-Farm Payrolls.

These reports detail the change in the number of employed people over the previous month with the exclusion of those employed in the farming industry. The US Bureau of Labor Statistics releases it on the first Friday of the month. It is relevant to forex traders because the US Federal Reserve takes this data into account each month when determining its interest rate policy.

If there is high unemployment, the Federal Reserve will likely cut interest rates to stimulate employment in the economy. This would mean that the value of the US dollar would fall, and so traders would enter short positions to benefit from this. The Consumer Price Index CPI is a measure of inflation. It details the changes in prices of various goods and services in the economy.

If the prices of goods and services are rising, it is an indication that there is likely to be inflation. At the time of writing, there has been a lot of discussion around the price of lumber in the United States, with many commentators believing that the increase in the price of lumber is a forewarning for the coming inflation.

Again, there is a direct relationship between CPI data and interest rates as the Federal Reserve monitors these releases and takes the information into account when determining interest rates. This is a comprehensive piece of data, and so it is difficult for central banks to make direct policy changes based purely on this information. However, it remains a primary gauge of overall economic strength and therefore can not be ignored.

If interest rates go up, so does the value of the currency. All roads appear to lead back to interest rates. It's no different when it comes to trading currencies. There is, however, a distinct difference with how news is handled in the stock market and the forex market. Let's go back to our example above and imagine that you heard that same report of the big software company filing bankruptcy, but let's say you heard the report a day before it was actually announced in the news.

Naturally you would sell off all your shares, and as a result of you hearing the news a day earlier, you would make save more money than everyone else who heard it on their nightly news. Sounds good for you right?

Unfortunately this little trick is called INSIDER TRADING, and it would have you thrown in jail. Martha Stewart did it and now she has a nice mug-shot to go along with her magazine covers. In the stock market, when you hear news before everyone else it is illegal. In the forex market, it's called FAIR GAME! The earlier you hear or see the news, the better it is for your trading, and there is absolutely no penalty for it! Add on some technology and the power of instant communication, and what you have is the latest and greatest or not so greatest news at the tip of your fingers.

This is great to react fairly quickly to the market's speculations. Big traders, small traders, husky traders, or skinny traders all have to depend on the same news to make the market move because if there wasn't any news, the market would hardly move at all!

The news is important to the Forex market because it's the news that makes it move. Regardless of the technicals, news is the fuel that keeps the market going! Why Trade the News The simple answer to that question is "To make more money! When news comes out, especially important news that everyone is watching, you can almost expect to see some major movement. Your goal as a trader is to get on the right side of the move, but the fact that you know the market will most likely move somewhere makes it an opportunity definitely worth looking at.

Dangers of trading the news As with any trading strategy, there are always possible dangers that you should be aware of.

Here are some of those dangers: Because the market is very volatile during important news events, many dealers widen the spread during these times.

This increases trading costs and could hurt your bottom line. You could also get "locked out" which means that your trade could be executed at the right time but may not show up in your trading station for a few minutes. Obviously this is bad for you because you won't be able to make any adjustments if the trade moves against you! Imagine thinking you didn't get triggered, so you try to enter at market then you realize that your original ordered got triggered!

You'd be risking twice as much now! You could also experience slippage. Slippage occurs when you wish to enter the market at a certain price, but due to the extreme volatility during these events, you actually get filled at a far different price. Big market moves made by news events often don't move in one direction. Often times the market may start off flying in one direction, only to be whipsawed back in the other direction.

Trying to find the right direction can sometimes be a headache! Profitable as it may be, trading the news isn't as easy as beating Pipcrawler at Call of Duty. It will take tons of practice, practice and you guessed it more practice!

Most importantly, you must ALWAYS have a plan in place. In the following lessons, we'll give you some tips on how to trade news reports.

Before we even look at strategies for trading news events, we have to look at which news events are even worth trading. Remember that we are trading the news because of its ability to increase volatility in the short term, so naturally we would like to only trade news that has the best market moving potential. While the markets react to most economic news from various countries, the biggest movers and most watched news comes from the U. The reason is that the U. has the largest economy in the world and the U.

Dollar is the world's reserve currency. This means that the U. news and data important to watch. With that said, let's take a look at some of the most volatile news for the U. In addition to inflation reports and central bank talks, you should also pay attention to geo- political news such as war, natural disasters, political unrest, and elections. Although these may not have as big an impact as the other news, it's still worth paying attention to them. When our economic guru Forex Gump is in a good mood, he usually releases a Piponomics article on upcoming news reports that you can play and with trade strategies to boot!

Check out some of his articles of this sort: Trade the News This Week 4 News Reports You Can Trade this Week Trade the U. Retail Sales Report With Me Make Pips with this Week's Big Reports Also, keep an eye on moves in the stock market. There are times where sentiment in the equity markets will be the precursor to major moves in the forex market. Now that we know which news events make the most moves, our next step is to determine which currency pairs are worth trading.

Because news can bring increased volatility in the forex market and more trading opportunities , it is important that we trade currencies that are liquid. Liquid currency pairs give us a reassurance that our orders will be executed smoothly and without any "hiccups". These are all major currency pairs! Remember, because they have the most liquidity, majors pairs usually have the tightest spreads. Since spreads widen when news reports come out, it makes sense to stick with those pairs that have the tightest spreads to begin with.

Now that we know which news events and currency pairs to trade, let's take a look at some approaches to trading the news. Non-Directional Bias There are two main ways to trade the news: a Having a directional bias b Having a non-directional bias Directional Bias Having directional bias means that you expect the market to move a certain direction once the news report is released.

When looking for a trade opportunity in a certain direction, it is good to know what it is about news reports that cause the market to move. Consensus vs. Actual Several days or even weeks before a news report comes out, there are analysts that will come up with some kind of forecast on what numbers will be released.

As we talked about in a previous lesson, this number will be different among various analysts, but in general there will be a common number that a majority of them agree on. This number is called a consensus. When a news report is released, the number that is given is called the actual number. For example, let's say that the U. unemployment rate is expected to increase. Imagine that last month the unemployment rate was at 8. With a consensus at 9. economy, and as a result, a weaker Dollar. So with this anticipation, big market players aren't going to wait until the report is actually released to start acting on taking a position.

They will go ahead and start selling off their dollars for other currencies before the actual number is released. Now let's say that the actual unemployment rate is released and as expected, it reports 9. As a retail trader, you see this and think "Okay, this is bad news for the U. It's time to short the dollar! Now let's revisit this example, but this time, imagine that the actual report released an unemployment rate of 8.

The market players thought the unemployment rate would rise to 9. What you would see on your charts would be a huge dollar rally across the board because the big market players didn't expect this to happen. Now that the report is released and it says something totally different from what they had anticipated, they are all trying to adjust their positions as fast as possible.

This would also happen if the actual report released an unemployment rate of The only difference would be that instead of the dollar rallying, it would drop like a rock! Since the market consensus was 9. looks a lot weaker now than when the forecasts were first released.

Keeping track of the market consensus and the actual numbers, you can better gauge which news reports will actually cause the market to move and in what direction. Non-directional bias A more common news trading strategy is the non-directional bias approach. This method disregards a directional bias and simply plays on the fact that a big news report will create a big move.

It doesn't matter which way it moves We just want to be there when it does! What this means is that once the market moves in either direction, you have a plan in place to enter that trade.

You don't have any bias as to whether price will go up or down, hence the name non-directional bias. Trading with a Directional Bias Let's go back to our example of the U. unemployment rate report.

Earlier, we gave examples of what could happen if the report came in light with expectations, or slightly better. Let's say there was a surprising drop.

What effect could this have on the dollar? One thing that could happen is that the dollar falls. Isn't the dollar supposed to rise if the unemployment rate is dropping? There could be a couple reasons why the dollar could still fall even though there are more people with jobs. The first reason could be that the long-term and overall trend of the U. economy is still in a downward spiral. Remember that there are several fundamental factors that play into an economy's strength or weakness.

Although the unemployment rate dropped, it might not be a big enough catalyst for the big traders to start changing their perception of the dollar. The second reason could be the reason for the unemployment rate drop. Perhaps it's right after Thanksgiving during the holiday rush.

During this time, many companies normally hire seasonal employees to keep up with the influx of Christmas shoppers. This increase in jobs may cause a short term drop in the unemployment rate, but it's not at all indicative of the long term outlook on the U. A better way to get a more accurate measure of the unemployment situation would be to look at the number from last year and compare it to this year. This would allow you to see if the job market actually improved or not.

The important thing to remember is to always take a step back and look at the overall picture before making any quick decisions. Now that you have that information in your head, it's time to see how we can trade the news with a directional bias. Let's stick with our unemployment rate example to keep it simple. By looking at what has been happening in the past, you can prepare yourself for what might happen in the future.

Imagine that the unemployment rate has been steadily increasing. You could now say with some confidence that jobs are decreasing and that there is a good possibility the unemployment rate will continue to rise. Since you are expecting the unemployment rate to rise, you can now start preparing to go short on the dollar.

Take note of the high and low that is made. This will become your breakout points. Since you have a bearish outlook on the dollar, you would pay particular attention to the lower breakout point of that range.

You are expecting the dollar to drop so a reasonable strategy would be to set an entry point a few pips below that level. You could then set a stop just at the upper breakout point and set your limit for the same amount of pips as the breakout point range.

One of two things could happen at this point. If the unemployment rate drops then the dollar could rise. No harm no foul! Or if the news is as you expected and the unemployment rate rises, the dollar could drop assuming the entire fundamental outlook on the dollar is already bearish. This is good for you because you already set up a trade that was bearish on the dollar and now all you have to do is watch your trade unfold.

Later on, you see that your target gets hit. You just grabbed yourself a handful of pips! The key to having a directional bias is that you must truly understand the concepts behind the news report that you plan to trade. If you don't understand what effect it can have on particular currencies, then you might get caught up in some bad setups. Luckily for you, we've got Pip Diddy and Forex Gump to help explain what effect each report can have on the forex market.

Letting the Market Decide Which Direction to Take The first thing to consider is which news reports to trade. Earlier in this lesson we discussed the biggest moving news reports. Ideally you would want to only trade those reports because there is a high probability the market will make a big move after their release.

The next thing you should do is take a look at the range at least 20 minutes before the actual news release. The high of that range will be your upper breakout point, and the low of that range will be your lower breakout point. Note that the smaller the range is the more likely it is you will see a big move from the news report. The breakout points will be your entry levels. This is where you want to set your orders.

Your stops should be placed approximately 20 pips below and above the breakout points, and your initial targets should be about the same as the range of the breakout levels. This is known as a straddle trade - you are looking to play both sides of the trades, whichever trade it moves. Now that you're prepared to enter the market in either direction, all you have to do is wait for the news to come out.

Sometimes you may get triggered in one direction only to find that you get stopped out because the price quickly reverses in the other direction. However, your other entry will get triggered and if that trade wins, you should recoup your initial losses and come out with a small profit. A best case scenario would be that only one of your trades gets triggered and the price continues to move in your favor so that you don't incur any losses.

Either way, if done correctly you should still end up positive for the day. One thing that makes a non-directional bias approach attractive is that it eliminates any emotions - you just want to profit when the move happens. This allows you take advantage of more trading opportunities, because you will be triggered either way. There are many more strategies for trading the news, but the concepts mentioned in this lesson should always be part of your routine whenever you are working out an approach to taking advantage of news report movements.

Summary: Trading the News There you have it! Now you know how to trade the news! Just keep these things in mind when trading:  When you have a directional bias, you are expecting price to move a certain direction, and you've got your orders in already.

You just want to get triggered. That's pretty much it Is it really that easy??? HECK NO!!! You'll have to practice and trade many different reports before you get a feel of which news reports will make the market move, how much of a surprise is needed for the market to move, and which reports to avoid trading. Like in any other trading method, your success depends on your preparation. This will take time and practice.

Do your homework and study the economic indicators to understand why they are important. Remember, nothing worth having comes easy, so stick with it and you'll find that trading news report will be very rewarding once you get the hang of it! Carry Trade Did you know that you can actually still make money in forex without doing anything? You just have to keep your fingers crossed that price stays the same for a long period of time. Lessons in Carry Trade 1. What is Carry Trade?

Carry trades involve buying higher-yielding currencies and selling lower-yielding ones. How Do Carry Trades Work for Forex? Seems too good to be true? Oh, but carry trades are true! Check out how they work in real life in the forex market! To Carry or Not to Carry Carry trades work well when risk aversion is low. Carry Trade Criteria and Risk There are only two things to consider when you pick a pair to do a carry trade, but that simplicity doesn't make it any less easy.

Summary: Carry Trade Simply put, carry trades can work by making moolah out of the interest rate differentials of two currencies. Did you know there is a trading system that can make money if price stayed exactly the same for long periods of time? Well there is and it's one the most popular ways of making money by many of the biggest and baddest money manager mamajamas in the financial universe! It's called the "Carry Trade". A carry trade involves borrowing or selling a financial instrument with a low interest rate, then using it to purchase a financial instrument with a higher interest rate.

Thus your profit is the money you collect from the interest rate differential. What's your profit? You got it! The difference between interest rates!

By now you're probably thinking, "That doesn't sound as exciting or profitable as catching swings in the market. In this section, we will discuss how carry trades work, when they will work, and when they will NOT work. We will also tackle risk aversion WTH is that?!? Don't worry, like we said, we'll be talking more about it later.

dollar and selling Swiss francs at the same time. Just like the example in the previous, you pay interest on the currency position you sell, and collect interest on the currency position you buy. What makes the carry trade special in the spot forex market is that interest payments happen every trading day based on your position. Technically, all positions are closed at the end of the day in the spot forex market. You just don't see it happen if you hold a position to the next day.

This is the cost of "carrying" also known as "rolling over" a position to the next day. The amount of leverage available from forex brokers has made the carry trade very popular in the spot forex market. What a deal, eh? Let's take a look at a generic example to show how awesome this can be.

For this example we'll take a look at Joe the Newbie Forex Trader. Instead of going out and blowing his birthday present on video games and posters of bubble gum pop stars, he decides to save it for a rainy day. Isn't that fantastic? com School of Pipsology and knows of a better way to invest his money. So, Joe kindly responds to the bank manager, "Thank you sir, but I think I'll invest my money somewhere else.

What will happen to Joe's account if he does nothing for a year? Well, here are 3 possibilities. Let's take a look at each one: 1.

Currency position loses value. The currency pair Joe buys drops like a rock in value. The pair ends up at the same exchange rate at the end of the year.

Currency position gains value. Joe's pair shoots up like a rocket! That would be a nice present to himself for his next birthday! Here is an example of a currency pair that offers a 4. Again, this is a generic example of how the carry trade works. Any questions on the concept? We knew you could catch on quick! Now it's time to move on to the most important part of this lesson: Carry Trade Risk.

To Carry or Not to Carry When Do Carry Trades Work? Carry trades work best when investors feel risky and optimistic enough to buy high-yielding currencies and sell lower yielding currencies.

It's kinda like an optimist who sees the glass half full. While the current situation might not be ideal, he is hopeful that things will get better. The same goes for carry trade. Economic conditions may not be good, but the outlook of the buying currency does need to be positive. If the outlook of a country's economy looks as good as Angelina Jolie, then chances are that that country's central bank will have to raise interest rates in order to control inflation.

This is good for carry trade because a higher interest rate means a bigger interest rate differential. On the other hand, if a country's economic prospects aren't looking too good, then nobody will be prepared to take on the currency if they think the central bank will have to lower interest rates to help their economy.

To put it simply, carry trades work best when investors have low risk aversion. Carry trades do not work well when risk aversion is high i. selling higher-yielding currencies and buying back lower-yielding currencies. When risk aversion is high, investors are less likely to take risky ventures.

Let's put this into perspective. Let's say economic conditions are tough, and the country is currently undergoing a recession. What do you think your next door neighbor would do with his money?

Your neighbor would probably choose a low-paying yet safe investment than put it somewhere else. It doesn't matter if the return is low as long as the investment is a "sure thing. he loses his job. In forex jargon, your neighbor is said to have a high level of risk aversion. The psychology of big investors isn't that much different from your next door neighbor.

When economic conditions are uncertain, investors tend to put their investments in safe haven currencies that offer low interest rates like the U.

dollar and the Japanese yen. If you want a specific example, check out Forex Gump's Piponomics article on how risk aversion led to the unwinding of carry trade. This is the polar opposite of carry trade. This inflow of capital towards safe assets causes currencies with low interest to appreciate against those with high interest. Carry Trade Criteria and Risk Carry Trade Criteria It's pretty simple to find a suitable pair to do a carry trade. Find a high interest differential. Find a pair that has been stable or in an uptrend in favor of the higher-yielding currency.

This gives you the ability to stay in the trade AS LONG AS POSSIBLE and profit off the interest rate differential. Pretty simple, huh? Up until recently, the Bank of Japan has maintained a "Zero Interest Rate Policy" as of September , the interest rate stands at 0. With the Reserve Bank of Australia touting one of the higher interest rates among the major currencies currently at 4.

From the start of to early , this pair moved from a price of If you couple that with interest payments from the interest rate differential of the two currencies, this pair has been a nice long term play for many investors and traders able to weather the volatile up and down movements of the currency market.

Of course, economic and political factors are changing the world daily. Interest rates and interest rate differentials between currencies may change as well, bringing popular carry trades such as the yen carry trade out of favor with investors.

Carry Trade Risk Because you are a very smart trader, you already know what the first question you should ask before entering a trade is right? Before entering a trade you must ALWAYS assess your max risk and whether or not it is acceptable according to your risk management rules.

That doesn't sound very good, does it? Remember, this is the worst possible scenario and Joe is a newbie, so he hasn't fully appreciated the value of stop losses.

When doing a carry trade, you can still limit your losses like a regular directional trade. He would still keep any interest payments he received while holding onto the position. Your profit is the money you collect from the interest rate differential. This is another way to make money in the forex market without having to buy low and sell high, which can be pretty tough to do day after day. Carry trades work best when investors feel like taking on risk.

Current economic conditions need not be good, but the outlook does need to be positive. If a country's economic prospects aren't looking too good, then nobody will be prepared to take on the risk. Carry trades do not work well when risk aversion is high. When risk aversion is high, investors are less likely to buy higher-yielding currencies or likely to reduce their positions in higher-yielding currencies.

When economic conditions are uncertain, investors tend to put their investments in safe haven currencies, which tend to offer low interest rates like the U.

It's pretty simple to find a suitable pair to do a carry trade. Look for two things: 1. Always remember that economic and political factors are changing the world daily. So, when doing a carry trade, you should still limit your losses like a regular directional trade. When properly applied, the carry trade can add significant income to your account, along with your directional trading strategies.

The U. Dollar Index If U. stocks have an index, so does the U. Read up on the dollar index and learn how you can use it in your trading!

Lessons in The U. Dollar Index 1. What is the Dollar Index? The dollar index is made up of six foreign currencies and includes 21 countries. How to Read the Dollar Index Be as awesome as Queen Cleopiptra and learn how to read the U. dollar index! Trade-Weighted Dollar Index The Fed wanted to measure the dollar's value more accurately so they came up with the Trade-weighted dollar index.

How is it different from the U. dollar index? Using the USDX for Forex Whenever you feel doubtful of the market outlook for the U. dollar, look no further than the U. dollar index because it will provide a clearer picture! The Dollar Smile Theory Have you ever wondered why the dollar rallies in the good times and in the bad? You're about to find out why. Oh wait, that last one is actually Harry Potter's broomstick. Well if U. stocks have an index, the U. dollar can't be outdone.

For currency traders, we have the U. Dollar Index USDX. Dollar Index consists of a geometric weighted average of a basket of foreign currencies against the dollar. Say whutttt!?!

Okay before you fall asleep after that super geeky definition, let's break it down. It's very similar to how the stock indices work in that it provides a general indication of the value of a basket of securities. Of course, the "securities" we're talking about here are other major world currencies.

The Basket The U. Dollar Index consists of six foreign currencies. They are the:  Euro EUR  Yen JPY  Pound GBP  Canadian dollar CAD  Krona SEK  Franc CHF Here's a trick question. If the index is made up of 6 currencies, how many countries are included? If you answered "6", you're wrong. If you answered "21", you're a genius! There are 21 countries total, because there are 16 members of the European Union that have adopted the euro as their sole currency, plus the other five countries Japan, Great Britain, Canada, Sweden, and Switzerland and their accompanying currencies.

It's obvious that 21 countries make up a small portion of the world but many other currencies follow the U. Dollar index very closely. This makes the USDX a pretty good tool for measuring the U. dollar's global strength. USDX Components Now that we know what the basket of currencies is composed of, let's get back to that "geometric weighted average" part.

Because not every country is the same size, it's only fair that each is given appropriate weights when calculating the U. dollar index. Check out the current weights: With its 16 countries, euros make up a big chunk of the U. Dollar Index. The next highest is the Japanese yen, which would make sense since Japan has one of the biggest economy in the world. The other four make up less than 30 percent of the USDX. Here's something interesting: When the euro falls, which way does the U.

S Dollar Index move? The euro makes up such a huge portion of the U. Dollar Index, we might as well call this index the "Anti-Euro Index". Because the USDX is so heavily influenced by the euro, people have looked for a more "balanced" dollar index.

More on that later though. First, let's go to the charts! How to Read the Dollar Index Just like any currency pair, the USDX even has its own chart. Holler at the U. Dollar Index: First, notice that the index is calculated 24 hours a day, five days a week.

Also, the USDX measures the dollar's general value relative to a base of For example, the current reading says This means that the dollar has fallen If the reading was This is when the world's biggest nations met in Washington D. and all agreed to allow their currencies to float freely against each. The start of the index is also known as the "base period".

Whether it is the policy decisions of the Chinese government, a natural disaster, or a terrorist attack, recent decades have demonstrated time and time again that world events have an impact on the direction of the markets. This sensitivity to external events is particularly prevalent in the forex markets. These markets respond not only to U. economic data such as interest rates or NFP numbers but also to news worldwide. There are 8 major currency pairs available to be traded at almost every well-established brokerage.

These currencies range from the U. dollar to the Japanese yen and the Swiss franc. That means that there are at least 8 countries whose economic data will have a bearing on the forex market.

Therefore, traders are practically guaranteed that there is always some economic data scheduled for release that they can use to inform their trading.

Indeed, up to 7 pieces of data are released every weekday that forex traders can use. This abundance of data and constant news releases are why the news more significantly influences the forex markets. The Governor of the Reserve Bank of New Zealand has issued a statement detailing that they will not be cutting interest rates as expected and there will instead be a slight increase in rates.

Since interest rates directly impact the value of a currency, this news will be relevant for forex traders. The unexpected news that there will be no cuts in the interest rates can therefore be expected to increase the value of the New Zealand dollar.

There are certain news releases in the forex market that are referred to as high-impact news. As the name suggests, these news releases tend to have the highest impact on the forex markets , and so traders are well-advised to take notice of them when released. The most important news releases will be the ones that relate to central bank meetings. To do this, they have several tools at their disposal.

One of these tools is the ability to control interest rates. Traders, therefore, keep a watchful eye on central bank meetings to determine whether there will be any change in interest rates in the future.

Forex traders are notorious for rigorously analyzing the monthly statements issued by central banks and have been known to send markets into a spin if the slightest hint of interest rates is cut. Unemployment data is released in several different ways depending on the jurisdiction that you are in. In the United States, the highest impact release is inarguably the US Non-Farm Payrolls.

These reports detail the change in the number of employed people over the previous month with the exclusion of those employed in the farming industry. The US Bureau of Labor Statistics releases it on the first Friday of the month. It is relevant to forex traders because the US Federal Reserve takes this data into account each month when determining its interest rate policy.

If there is high unemployment, the Federal Reserve will likely cut interest rates to stimulate employment in the economy. This would mean that the value of the US dollar would fall, and so traders would enter short positions to benefit from this.

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Darren Chia. Continue Reading Download Free PDF. Content Page no. Fundamental Analysis. Interest Rates Long-term Market Movers. News and Market Data. Market Reaction. Market Sentiment. Commitment of Traders Report. Trading the News. Carry Trade. The US Dollar Index. Inter-market Correlations. Gold Correlation. Bonds Correlation. Bond Spreads. Bond Markets, Fixed Income Securities, and the Forex Market. Global Equity Markets to Trade FX. The Relationship Between Stocks and Forex. Correlation Between Stocks and Currencies.

Inter-market Analysis Cheat Sheet. Country Profiles and Major Economies. United States of America. Euro Zone. United Kingdom. New Zealand. If you think about it, this makes a whole lot of sense! Just like in your Economics class, it is supply and demand that determines price.

Using supply and demand as an indicator of where price could be headed is easy. The hard part is analyzing all the factors that affect supply and demand. In other words, you have to look at different factors to determine whose economy is rockin' like a Taylor Swift song, and whose economy sucks. You have to understand the reasons of why and how certain events like an increase in unemployment affect a country's economy, and ultimately, the level of demand for its currency.

The idea behind this type of analysis is that if a country's current or future economic outlook is good, their currency should strengthen. The better shape a country's economy is, the more foreign businesses and investors will invest in that country. This results in the need to purchase that country's currency to obtain those assets. In a nutshell, this is what fundamental analysis is: For example, let's say that the U.

dollar has been gaining strength because the U. economy is improving. As the economy gets better, raising interest rates may be needed to control growth and inflation. Higher interest rates make dollar-denominated financial assets more attractive. In order to get their hands on these lovely assets, traders and investors have to buy some greenbacks first.

As a result, the value of the dollar will increase. Later on in the course, you will learn which economic data drives currency prices, and why they do so. You will know who the Fed Chairman is and how retail sales data reflects the economy. You'll be spitting out interest rates like baseball statistics. But that's for another lesson for another time. For now, just know that the fundamental analysis is a way of analyzing a currency through the strength or weakness of that country's economy.

It's going to be awesome, we promise! Fundamental Analysis We already touched upon fundamental analysis in Kindergarten. Now it's time to dig a little deeper! Lessons in Fundamental Analysis 1. What is Fundamental Analysis? If you like analyzing social, economic, and political factors that affect supply and demand, fundamental analysis is for you!

Interest Rates Interest rates changes are one of the biggest fundamental catalyts out there. Heck, you could even say that they make the forex world go 'round! The Who's Who of the Central Bank Central banks are like puppeteers. They have full control over monetary policies and their words can move markets in an instant. Long-term Market Movers As with personal relationships, it's important to consider long-term factors in trading. They may hold the key to your happiness! News and Market Data In forex trading, you've got to keep up to date with the latest news and market data to stay alive.

Be in the know by checking out these market info tools! Market Reaction A super duper important report just came out Now what?! Along your travels, you've undoubtedly come across Gulliver, Frodo, and the topic of fundamental analysis.

Wait a minute We've already given you a teaser about fundamental analysis during Kindergarten! Now let's get to the nitty-gritty!

What is it exactly and will I need to use it? Well, fundamental analysis is the study of fundamentals! That was easy, wasn't it? There's really more to it than that. Soooo much more. Whenever you hear people mention fundamentals, they're really talking about the economic fundamentals of a currency's host country or economy. Economic fundamentals cover a vast collection of information - whether in the form of economic, political or environmental reports, data, announcements or events.

Fundamental analysis is the use and study of these factors to forecast future price movements of currencies. It is the study of what's going on in the world and around us, economically and financially speaking, and it tends to focus on how macroeconomic elements such as the growth of the economy, inflation, unemployment affect whatever we're trading. Fundamental Data and Its Many Forms In particular, fundamental analysis provides insight into how price action "should" or may react to a certain economic event.

Fundamental data takes shape in many different forms. It can appear as a report released by the Fed on U. existing home sales. It can also exist in the possibility that the European Central Bank will change its monetary policy. The release of this data to the public often changes the economic landscape or better yet, the economic mindset , creating a reaction from investors and speculators.

There are even instances when no specific report has been released, but the anticipation of such a report happening is another example of fundamentals. Speculations of interest rate hikes can be "priced in" hours or even days before the actual interest rate statement.

In fact, currency pairs have been known to sometimes move pips just moments before major economic news, making for a profitable time to trade for the brave.

That's why many traders are often on their toes prior to certain economic releases and you should be too! Generally, economic indicators make up a large portion of data used in fundamental analysis. Like a fire alarm sounding when it detects smoke or feels heat, economic indicators provide some insight into how well a country's economy is doing.

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Web9/11/ · Not all news is suitable for forex trading. Generally, any of the news releases listed above should be suitable to trade on. The most important news will typically come WebNews Trading Forex Strategy - Free download as PDF File .pdf), Text File .txt) or read online for free. Scribd is the world's largest social reading and publishing site. Open Web1 Minute Forex News Trading Strategy-Learn How to Trade Forex Currency News. Hello Traders, The 1 minute forex news trading strategy is another strategy where you can WebForex is a global, decentralized market used to trade different currencies from around the world. This market is responsible for determining the foreign exchange rates for every The 1 minute forex news trading strategy is another strategy where you can use to trade currency news. Every month, the currency market has market moving news they are announced from interest rate decisions, to non-farm payroll to employment rates etc ... read more

Well, fundamental analysis is the study of fundamentals! Are you ready to create your very own COT indicator? Developments in other countries are also taken into consideration, as factors such as the appreciation of the euro or a decrease in foreign currency reserves the dollar is held by other countries are bad news for the dollar, while instability abroad is good news for the dollar. This gives me ample time to digest the news of the night before and the morning itself, which allows me to anticipate the movements of currency pairs later on in the day. This act of central bank intervention may cause other institutional players to follow suit, and further drive the currency exchange rate towards the rate that is favoured by the intervening central bank. If the data is weak then interest rates and the dollar will usually fall.

Companies willingly take this money and say, "Hey, forex news trading strategy pdf making money! In addition to inflation reports and central bank talks, you should also pay attention to geo- political news such as war, forex news trading strategy pdf, natural disasters, political unrest, and elections. They are known to be anti-trend and are usually on the wrong side of the market. Human beings are emotional creatures, and most of our decisions are guided more by emotions than logical thinking. Trading blogs, especially those that have fresh and relevant material, can be a valuable source of useful and targeted information for busy traders who hold day jobs. Central banks have their own unique set of goals brought on by their distinctive economies. Inter-market Analysis Cheat Sheet.

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