Trade FOREX with FXCM

  • Award-Winning Platform
  • 24/7 Customer Support
  • Trade Directly on Charts
  • Free $50K Practice Account
View RSS Feed


Economic news can be used for making profit while trading

Rate this Entry
by , 11-24-2011 at 09:12 AM (1998 Views)
Today I want to talk a little about trading strategy that quite a lot of day traders enjoy. It is economic news trading system. I know that no investor would consider using this kind of approach in trading for a lot of reasons, but a person who might be starting his/her career in trading it is useful to know about this trading method and possible profits as well as risks involved with it.

You probably know that all investors want to have a thorough understanding of a specific economy he is going to invest to. Fundamental news releases can convey it (in part) to investor. That’s why all traders follow what numbers are released each week from different countries and make decisions about possible areas of investing their capital.

The good news for day trader is that when the news is released it very often creates volatility in the financial markets which a trader can use to his advantage to make some nice cash. It is difficult to make money when markets are not moving anywhere. It is quite easy when they do.
The best part about this strategy is: even though a trader trades a fundamental event he does not necessarily have to know anything about fundamental analysis. One just has to know that a news release can create big moves and use this knowledge to place orders outside the most recent range (the most recent high and low) with an expectation that those would be triggered after the news is actually released.

One would naturally place a long order above the most recent high and a short order below the most recent low. The rest might be obvious for those who know what happens in the first fifteen minutes after a news release. Prices usually go wild and start moving upwards or downwards. One of the orders will be opened. And that order will start showing profit very fast. After a few minutes trader will have to close the second order which was not opened. Then you continue going forward with the market with the position that was opened as long as volatility is present. When it goes down you exit the game. Most often with nice profit.

I hope you see how you can trade fundamental news events. For more trading strategies you can visit a website trends and find out what you need. Read also articles: support, range trading technical analysis and resistance levels.

Updated 11-24-2011 at 09:15 AM by fibo777



Disclaimer: Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. The possibility exists that you could sustain a loss in excess to your investment and therefore you should not invest money that you cannot afford to lose. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts. Any opinions, news, research, analyses, prices, or other information contained on this website is provided as general market commentary and does not constitute investment advice. FXCM will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.