Before jumping to how one can trade the forex market with fundamental news, one should get to know what fundamental news is.
WHAT IS FOREX FUNDAMENTAL NEWS?
It is simply a method of trading the forex market with news release as indicators. It is a form of fundamental analysis where economic indicators (the forex news releases) are studied with the aim of predicting the future market conditions. So, in a nutshell, forex fundamental news can be likened to indicators, which when studied closely, can help traders predict the price movement of concerned currency pairs. Examples of forex fundamental news (also known as economic indicators) are
- GDI; Gross Domestic Product
- CPI; Consumer Price Index
- Employment reports
- Interest rates
- Trade balance
- Current account balance
- Commodity price index
- Industrial production index
- Institute of supply management
- Yield curve
- Retail sales
A good knowledge of all the economic indicators listed above is needed for one to efficiently trade forex fundamental news.
APPLICATION OF FUNDAMENTAL NEWS RELEASE IN TRADING THE FOREX MARKET
There are quite a lot of indictors for news release, and it can be difficult keeping an eye on the chart and an ear for any of the news. As a matter of fact, it is not necessary to be on the lookout for all the forex fundamental news indicators. Traders should know what news events are important enough to move the market, and the ones that are not. So, the first thing required of anyone that wants to know how to trade forex fundamental news is to know which of them is worth trading.
The basic reason some traders chose to trade news is that it heightens the level of volatility in the forex market within a remarkably short time. All news bring in volatility, but some bring in more volatility that the others. If the target is a volatile market condition, then news with the highest moving potential is what news traders should be on the lookout for.
GO FOR THE BIGGEST MARKET MOVERS
This may not be all there is to how to trade forex fundamental news, but is really important. The biggest mover and the most followed news events of the forex market are about the US dollar. The US economy is the largest in the world, the world’s reserve currency, and a dominant one at that seeing as it is part of at least 90% of all forex transaction that ever takes place. Following news about the USD and trading accordingly is a good way of efficiently trading the forex fundamental news.
Other things to put into consideration when trading forex fundamental news are
- Keeping an eye on the stock market
- Monitor the price movement of the major currency pairs
- Learn to use the economic news calendar
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.