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Most short-term traders base their decisions solely on technical analysis and price charts, regardless of the markets they trade. It is common for traders to completely ignore fundamental factors and instead follow price trends, analyze support and resistance levels, and evaluate various signals from technical indicators.
Forex News Monday
However, in the modern trading world, fundamental analysis is as important as technical analysis. Press releases such as earnings reports and changes in interest rates and inflation can have a significant impact on markets. Therefore, trading on press releases can be extremely beneficial for investors and can significantly strengthen their trading strategies by adding economic announcements to their purely technical and graphical approach. Learn how to invest in news and spot potential trading opportunities in financial markets.
Trading The News
To read the news, you need to be familiar with economic indicators, which are macroeconomic factors that affect all financial markets, whether forex, stocks or indices. These may include changes in interest rates, inflation, unemployment levels or retail incomes for a particular country, all of which have a significant impact on financial markets and the overall health of the country.
Economic announcements often include these specific factors when informing investors about recent changes in the markets. This could impact market sentiment, especially if the data release is not in line with investors’ expectations.
News trading strategy involves trading based on market expectations before and after a news release. Trading based on news announcements may require you to make quick decisions as financial markets can be affected almost instantly. Therefore, you will need to make a quick decision on how to negotiate the ad.
When trading press releases, it is important that you know how financial markets work. Sometimes current events are already factored into asset prices. This is because investors try to predict the consequences of future announcements and therefore the market reacts by changing the price of an asset. News-based trading is particularly useful in volatile markets such as oil trading.
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Learn more about using fundamental analysis to consider external factors as part of your news trading strategy.
Like other asset classes, forex trading news can become particularly active before and after major economic events. However, there are important differences between the types of news that distinguish currencies from other financial markets.
Foreign exchange markets tend to respond most to macroeconomic news, that is, developments that reflect or affect the broader economy. Generally speaking, forex traders can look at economic news to assess its impact on interest rates and monetary policy. More hawkish (aggressive) news may suggest that a central bank tends to increase the value of currency pairs relative to other currencies, while dovish (pacific) news may cause a currency to lose value.
Currencies of countries that are major exporters of commodities or raw materials can be affected by forex trading news as it affects the prices of the major commodities they produce. These currencies are often called source currencies. Commodity prices affecting these currencies can be affected by issues affecting supply and demand.
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On the supply side, news suggesting low supply can push prices up, while news suggesting high supply can push prices down, which in turn affects the respective currencies. Information that may reflect changes in supply include political tensions, wars, terrorism, weather, economic sanctions, labor relations (strikes), etc. It may be related to. Speculation and demand-driven pricing are primarily influenced by many of the important news mentioned above, as well as commodity stock reports and outlooks.
To develop a comprehensive Forex trading strategy using press releases, Forex traders tend to look for certain key currency indicators that can influence interest rate speculation, including:
News about market sentiment can also impact foreign exchange trading, particularly the major currencies USD, JPY and CHF, as well as those considered safe havens, including gold. These currencies tend to attract capital during turbulent times, and when financial markets stabilize, capital outflows.
News that could affect risk-free or risk-free trading includes stock market returns and volatility, domestic or continental financial stress, political unrest, elections, treaty negotiations and economic data, and other general news beyond central banks. Recent examples include Greece’s debt crisis and turmoil in the Chinese market.
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Marketers should be aware that the demand for many commodities, and therefore the prices of those commodities, rise and fall with the seasons. Seasonal news and effects of Forex trading are often seen in energy and agricultural commodities, but less so in precious metals. The table below shows some of the major source currencies and the commodities that influence them. These can be used by traders as a type of Forex news trading signals because they can help predict the direction the currency price will go.
Trading stocks based on press releases is a strategy used by many long-term investors as well as short-term investors. If a company consistently posts strong balance sheets, cash flow, and earnings, a trader may decide to purchase the stock and hold it for a longer period of time.
However, if a company releases a report with financial data that is significantly lower than expected, it could create a rally for traders who will sell as the stock’s value declines. Investors can analyze a company before deciding to invest in a stock. This includes analyzing growth rate potential as well as possible legal, political or bankruptcy risks. Financial ratios such as price-to-earnings and dividend yields can also indicate whether a stock is currently a solid investment.
Our Morningstar stock research reports are regularly updated with new information on company fundamentals. These are available for a wide range of stocks on our platform and can also indicate whether they are considered overvalued, fair valued or undervalued on the stock market. This information can help investors decide whether to take a position. Create a real account now to access our Morningstar reports.
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In general, news that has a significant impact on a company’s shares may not have a major impact on currencies. Stock market news that has little or no impact on currencies include earnings reports, management changes, mergers and acquisitions, and partnerships. Therefore, it may be easier for some to make more reliable predictions about market performance.
Some brokers offer automatic informative trading signals that can help a trader decide whether to enter, exit, or avoid a trade. These indices are based on price fluctuations following a particular press release and may influence investors to buy or sell an asset.
A manual alternative is to track upcoming tradable events using our economic calendar. This feature is available on our Next Generation platform and highlights events such as unemployment reports, GDP, CPI and PPI figures, as well as jobs reports and sentiment surveys. All of these events can affect market sentiment and cause significant price fluctuations in financial markets.
Our market calendar can be customized by date, market impact (low to high) and country, so you can filter them to be more relevant to the asset or market you want to trade. You can also set alerts for individual events you want to monitor.
Forex Market Vs. Stock Market
Some important economic announcements may cause additional fluctuations in the markets, even for a short time. Even the most accurate currency models or stock charts can be temporarily out of sync due to a major business announcement, such as the latest unemployment news or changes in a national bank’s interest rates or inflation.
Paying attention to when trade announcements are made can mean making a carefully planned trade just before a major event occurs and triggering your immediate stop loss. It may be more appropriate to wait to open a new position after the events have occurred and then see if the reason for the transaction is still valid.
Normally, there is consensus among leading economists about the level of likelihood of an economic announcement. Changes in non-farm employment, GDP or inflation data will impact the market. For example, a low unemployment rate indicates a strong economy; Many people expect the stock market to rise. A decision to lower interest rates can make a country’s currency less attractive and cause it to fall relative to other global currencies.
However, sometimes economic announcements can be very different from what the broader market expects, which can cause the market to react in the opposite direction. For example, if a
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