Forex News Straddling Strategy (Part I)
Traders around the world make a living by processing and translating information into money. The forex market is extremely sensitive to the flow of news related to it. Major short tern currency moves are almost always preceded by changes in fundamental views influenced by the news.
In an era where information can be extremely powerful and strategic asset, whether to individual or corporation and information equals money especially to a trader, shutting yourself off to the news can be suicidal.
Traders especially the day traders require the latest up to the second news updates so as to facilitate their trading decisions which have to be made at the lightening speed. The speed of the news dissemination is very important to traders.
Many opt for instant online news services such as the Dow Jones Newswires, Bloomberg and Reuters which display the latest financial and economic news on their computer monitors.
News is important to currency trading. Each new piece of information can potentially alter the traders perception of the current or future situation relating to the outlook of certain currency pairs. Market work on perceptions! Perceptions change, expectations change and prices change.
Socio-political events that are happening around the world like in Middle East and North Korea also tend to affect the forex market in major ways. News that is of great importance to forex traders is generally related to a countrys economic, monetary and political situations.
It is expected that other traders see and interpret the same news in a similar fashion and adopt the same directional bias. A traders action is based on the expectation that there will be follow through in prices. These traders will be preparing to cover their existing positions or initiate new positions based on this news. It is all based on your perceptions. Sometimes you can wrong too! Market may not react the way that you had anticipated.
News is a very important catalyst of short term price movements because of the expected impact it has on other market players. This is in a way an anticipatory reaction on the part of the trader as he or she assumes that the other traders will be affected by the news as well.
If the news happens to be bullish for the USD, traders who reacts the fastest will be the first to buy USD followed soon by other traders. Other traders may be slower. They maybe were waiting for some technical criteria to be met before they jump on the bandwagon.
There will be many who will join in the frenzy at a later stage when they get hold of the delayed news in the morning newspapers or from their brokers. This progressive entry of the USD bulls over time is what sustains the upward move of USD against another currency.
Almost the reverse will happen on the surprise bearish US Dollar news. Traders who get the news first will start selling US Dollar instantly on the assumption that when other traders will hear the news, they will also start selling. A downtrend develops. Other traders join soon. The downtrend becomes strong. Forex market is constantly in the throws of news driven volatility. - 23162
In an era where information can be extremely powerful and strategic asset, whether to individual or corporation and information equals money especially to a trader, shutting yourself off to the news can be suicidal.
Traders especially the day traders require the latest up to the second news updates so as to facilitate their trading decisions which have to be made at the lightening speed. The speed of the news dissemination is very important to traders.
Many opt for instant online news services such as the Dow Jones Newswires, Bloomberg and Reuters which display the latest financial and economic news on their computer monitors.
News is important to currency trading. Each new piece of information can potentially alter the traders perception of the current or future situation relating to the outlook of certain currency pairs. Market work on perceptions! Perceptions change, expectations change and prices change.
Socio-political events that are happening around the world like in Middle East and North Korea also tend to affect the forex market in major ways. News that is of great importance to forex traders is generally related to a countrys economic, monetary and political situations.
It is expected that other traders see and interpret the same news in a similar fashion and adopt the same directional bias. A traders action is based on the expectation that there will be follow through in prices. These traders will be preparing to cover their existing positions or initiate new positions based on this news. It is all based on your perceptions. Sometimes you can wrong too! Market may not react the way that you had anticipated.
News is a very important catalyst of short term price movements because of the expected impact it has on other market players. This is in a way an anticipatory reaction on the part of the trader as he or she assumes that the other traders will be affected by the news as well.
If the news happens to be bullish for the USD, traders who reacts the fastest will be the first to buy USD followed soon by other traders. Other traders may be slower. They maybe were waiting for some technical criteria to be met before they jump on the bandwagon.
There will be many who will join in the frenzy at a later stage when they get hold of the delayed news in the morning newspapers or from their brokers. This progressive entry of the USD bulls over time is what sustains the upward move of USD against another currency.
Almost the reverse will happen on the surprise bearish US Dollar news. Traders who get the news first will start selling US Dollar instantly on the assumption that when other traders will hear the news, they will also start selling. A downtrend develops. Other traders join soon. The downtrend becomes strong. Forex market is constantly in the throws of news driven volatility. - 23162
About the Author:
Mr. Ahmad Hassam has done Masters from Harvard University. He is interested in day trading stocks and currencies. Try Netpicks Forex Signals Free. Learn Forex Trading!
posted by X - Men @ 3:04 AM
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