Non-news Trading on Forex

As Nathan Rothschild once said, who owns the information, he owns the world. Indeed, the timely information can be a rather valuable asset, especially when it comes to the financial market. Some traders try to catch the right moment and trade on news releases, hoping that this or that event will push the market into a favorable direction. However, one should be very cautious when employing such a strategy.

News trading is one of the day trading techniques. However, staking on news may result in huge financial losses. Why does it happen? Some beginning traders may suppose that publication of a certain economic indicator will surely result in a rise or fall of a certain currency, but it is wrong. In fact, the currency`s reaction to publications can differ from the expected one. Knowing in advance when a certain report will be published and what influence it can put on the market, investors start acting. By the moment when this report is unveiled, the market reaction can be hardly visible or there will be no reaction at all, as the market discounts everything.

At the same time, the news should not be ignored. There is a tendency that upbeat news can contribute to a bullish market while negative statistics often put an asset under pressure. So, it can prove to be useful to keep abreast of the market events. However, one should not rely on the news completely and expect that a certain publication will necessarily have a certain effect.

One should also be aware of the fact that some events affect the market more than others. For many years it has been noticed that certain economic factors have a more profound impact on the market. Here are some of these factors:

The interest rates set by major central banks
Inflation rate
GDP and industrial output
Business activity indices
Speeches of financial policymakers in a certain country who are the most influential ones. In particular, these are the top-officials of the United States, the United Kingdom, EU countries, Japan, Switzerland, and Canada.

The result of most economic events is predictable in most cases. Before the news is released, experts present their forecasts that can also influence the currency rates movements. The market may respond to the news in the following ways:

If the data meets the expectations, the rate of a certain currency is likely to remain basically unchanged.
In case of wrong forecasts or any quite unexpected moves, the current trend may reverse.

A very useful tool for those who employ the news trading strategy is an economic calendar as it helps traders to be aware of the upcoming events.