News trading strategy used for describe forex trading events

“News trading” is just an odd phraseology used to describe forex trading centered around news-worthy events.  Usually, these events are releases of important economic data.  About half the time, the news involves the US market, but just as often it can be economic data pertinent to the other half of the currency pair. Much of the trader's energy when utilizing a news trading strategy is spent determining whether or not the actual news release will match, exceed or fall short of forecasts.

The next part of the equation is predicting how much the market will react.  Obviously, some news stories are more important than others.  More tricky to figure out, however, is how the market will take a particular piece of news in a particular setting. Jobs reports are always going to move the market a little, so let's take something a little less important, say, housing starts.  Before placing your orders, ask yourself, is the market concerned with housing at the present time?  If so, to what degree?  Is there a firm consensus that housing is going one way or another right now, or is the market trying to still figure things out?

Once you decide how much you think the market is going to react, you have two main options. The first is to place a straddle order, wherein you buy longs and shorts on either side of the current value of your currency pair.  That way, you don't need to predict which direction the market is going to move.  It work well, but the problem is sometimes you get completely burned:  large fluctuations resulting from the volatility that the news event has produced means both of your orders get filled, and you end up losing a whole lot of money. What's important with straddle orders is that you cautiously and accurately predict how much the market is going to move.

The second possibility is to go long or short on the currency, depending on which way you think the market is going to move.  Obviously, there is more risk of not having an order filled, but at the same time, you have more capital available to increase your order size than if you were to place a straddle order. Both straddling and a simple long or short are relatively risky strategies:  Trying to predict the news is usually harder than analyzing already existing data or the market's mood.  When everything is predicted right, though, it can be an extremely profitable endeavor.  As such, trading on the basis of news events is one of the most important and popular forex trading strategies.  It is, also, one of the most exciting. 

Introduction to Currency Pairs

There are three groups: the majors, the crosses and the exotics:

Major Currency Pairs
The “majors” are those currencies that are the major countries that are paired vs. the U.S. dollar (plus their nick names in parenthesis):

List of currency pairs:

• EUR/USD – Euro vs. the U.S. dollar (the Anti-dollar)
• GBP/USD – British pound vs. the U.S. dollar (Sterling, Cable)
• USD/JPY – U.S. dollar vs. the Japanese yen (the Yen)
• USD/CHF – U.S. dollar vs. the Swiss franc (Swissie)
• USD/CAD – U.S. dollar vs. the Canadian dollar (Loonie)
• AUD/USD – Australian dollar vs. the U.S. dollar (Aussie)
• NZD/USD – New Zealand dollar vs. the U.S. dollar (Kiwi or Kiwi dollar)

Currency Crosses
The “crosses” are those pairs that are not paired vs. the dollar such as:

• EUR/CHF – Euro vs. the Swiss franc
• EUR/JPY – Euro vs. the Japanese yen
• EUR/GBP – Euro vs. the British pound
• EUR/CAD – Euro vs. the Canadian dollar
• EUR/AUD – Euro vs. the Australian dollar
• EUR/NZD – Euro vs. the New Zealand dollar
• GBP/CHF – British pound vs. the Swiss franc
• GBP/JPY – British pound vs. the Japanese yen
• GBP/AUD – British pound vs. the Australian dollar
• CAD/JPY – Canadian dollar vs. the Japanese yen
• AUD/JPY – Australian dollar vs. the Japanese yen
• AUD/CAD – Australian dollar vs. the Canadian dollar
• AUD/NZD – Aussie dollar vs. the New Zealand dollar
• AUD/CHF – Australian dollar vs. the Swiss franc
• NZD/JPY – New Zealand dollar vs. the Japanese yen
• CHF/JPY – Swiss franc vs. the Japanese yen

Exotic Currency Pairs
The “exotics” are those pairs that are emerging economies rather than developed/industrialized nations. Here are a few of the more commonly traded exotics:

• USD/TRY – U.S. dollar vs. the Turkish lira
• EUR/TRY – Euro vs. the Turkish lira
• USD/ZAR – U.S. dollar vs. the South African rand
• USD/MXN – U.S. dollar vs. the Mexican peso
• USD/SGD – U.S. dollar vs. the Singapore dollar

Note: the exotics are not the best place to begin as a trader. Start with the majors and crosses first. Then as you gain profitability with them, and then you might try the exotics later on.

Now that we know what the pairs are… when do they trade?
Currency Trading Sessions
Generally speaking, the sessions go as follows: The U.S. session starts around 8am EST and goes until around 5pm EST. The European session starts around 3am EST and goes until around 11am EST. The Asian session starts around 5pm EST and goes until about 4am EST. (Also, note that the trading week starts on Sunday evening around 5pm EST and goes through Friday at around 4pm EST. It trades 24 hours a day between those times and is closed for retail trading from Friday evening through Sunday evening.)

The European session tends to carry the most volume and volatility. The U.S. session produces the next biggest moves and volume. The Asian session will consist of lighter volumes than the previous sessions and tends to normally produce smaller movements. The first two sessions are usually when intraday trends form and the Asian session is when ranges are more likely to form.

Now, that’s all “generally speaking”. If you want to trade the pairs that will be the most active, then trade them when their banks are open during their business day. In other words, AUD/JPY will be more volatile in the Asian session than EUR/USD because when Asia is “open for business”, the European and U.S. banks are closed for business. Now it doesn’t mean that forex trading ceases in the EUR/USD during this period but it does mean that it won’t generally have the volatility of an Asian pair in the Asian session.

Note: EUR/USD is the most widely traded pair and therefore carries the absolute highest volume of all currency pairs. It makes up about 27% of forex trading volume. Next is USD/JPY at 13%, followed by GBP/USD at 12% of the total forex trading volume.

How to Make Save Money on Forex

During great economic recessions, the opportunity exists to make money and great investments by taking advantage of everything the recession has to offer. The cost of real estate has plummeted, so what's stopping you from investing in property? The demand for work is tremendous, so why aren't you hiring workers for that business you have dream about for the past decade?

The answer is painfully obvious - in order to make money, you need to have money. And there's one thing people don't have during a recession, it's money.

While it's hard to earn money in real estate with the price of homes in the tens of thousands, and it's even harder to start up a business, the opportunity to make money on the Forex market always exists.  Keep in mind that the opportunity to lose money also exists and traders could sustain a loss of some or all of their initial investment.  Wondering how to make money online on the Forex market? You have to learn. How do you learn? We teach you.

On the Forex market, traders can make money or lose money by exchanging currencies. The profit and loss occurs when the price of these currencies fluctuate.

Does it sound hard? It shouldn't. Take a look at this chart below.

In this example, a trader aspires to make money online by trading the GBP/USD.

Let's say the trader tries to work online on Forex with a deposit of $200.

With a leverage of 100:1*, a trader can buy or sell up to $20,000 with an original investment of $200. If the trader sold $20,000 GBP against USD at 1.6650 and two weeks later bought at 1.5800, let's see how much money he or she would have made:

(1.6650-1.5800) X $20,000 = $1,700

You could have turned your $200 into $1,700.

That doesn't sound too impressive, but remember that in order to make money, you need money.

If your trade amount was $1,000 instead of $200, you would have made $8,500 in two weeks. Not many people could complain about that pay check.

Forex trading (off-exchange foreign currency trading) involves substantial risk of loss and is not suitable for all investors.