Forex Trading Education - Trading the News

News trading is a popular tactic that many forex traders will try sometime in trading career. However, many people are aware of what it takes to trade news successfully. In this short article, I will discuss the implications of the news trading for retail traders like you and me.

What is news trading?

News trading (also known as 'trading news') involves making a trade just before or immediately after the release of important economic news announcements. Merchants 'trade news', because market prices tend to move to the good news, and move down to the bad news. It's important economic news announcements typically affect currency prices directly.

Why is news trading so popular?

The biggest reason for the popularity of news trading is a potential for large price movements in a very short time. Prices can move up to 100 pips (or more) for less than a minute after the news was released.

Great profit potential is what lures most traders to participate in news trading. You can do a lot of money in a very short time.

But! News trading is a dangerous

Indeed, with great profit potential comes the possibility of great loss. News trading is dangerous, because if you are caught on the wrong side of the store, you can lose money so fast you'll barely have enough time to manually close the trade. Even stop loss orders are unreliable during news trading due to the high probability of suffering from sliding.

If the news trade?

Honesty, I would not recommend anyone trade news, unless they are absolutely sure you're doing. Successful trading requires one news first to have superior (faster) news feeds and others have an uncanny reaction speed quickly enter the trade at the time the news was released.

Any other form of trading news, such as placing a limit order to be above or below the market price is simply guessing. And if you're guessing, you will not survive very long on the market.

My advice for most retail traders avoid trading news altogether.