Best Forex Calendar: Awesome Trading Forex News Strategy
Hi friend! This blog post deals with how to prepare for news releases, and how to trade the aftermath. I will actually give you four diagrams that will enable you to follow price’s lead, and react with precision. I will also provide you with trading forex news advice.
In currency trading, going short is as effective a trading strategy as going long.
‘Selling high, and covering low,’ is standard practice in the forex.
Forex Trading Tip
Forex Calendar News
Other Strategic Times
Interest Rate News
Crosses and the News
Daily Data and News
The Peril of Trading News
Having a Leg Up
Sticking to a Trading Plan
Up the Periscope
The ADP Employment Report
The NFP Employment Report
Watch Out Below!
Inspiration and Quotes
The forex market is open for business six days a week, thus affording astute traders the opportunity to trade events and news on the fly.
The forex opens again up for business late Sunday afternoon, having closed late Friday afternoon at the New York close (5 pm ET).
Any events or news that comes out over the weekend will be immediately reflected in price action.
This is why you might see price settle at one level on Friday, and open at a different level on Sunday.
Much of the action during the Asia-Pacific session focuses on the Japanese yen currency pairs, such as the USD/JPY (U.S. dollar/Japanese yen) and the yen crosses, like EUR/JPY and AUD/JPY.
This is because of the size of the Japanese market and the importance of Japanese data to the market.
Japanese financial institutions are almost active during this session.
Accordingly, you can often get a feel for what the Japanese market is doing based on price movements.
Data events and news from the Eurozone (and countries like France and Germany), Switzerland, and the U.K. are usually released in the wee hours of the European session.
It follows then that some of the biggest moves and the most active trading occur with the European currencies (EUR, GBP, and CHF) and the euro cross-currency pairs (EUR/CHF and EUR/GBP).
Asian trading centres start winding down in the late-morning hours of the European session, and North American financial centres come on stream a few hours later, around 7-8 am ET.
News follows shortly thereafter at 8:30 am ET (1:30 pm GMT). This is when the Non-Farm Payroll data arrives the first Friday of each month (with occasional exceptions).
The next most exciting time for the forex is the London close, in and around 11:30 am ET.
Lots of exciting price action occurs then, usually resulting in a nice swing trade (price reversing direction).
Key U.S. economic data is released during the North American morning.
This is when the forex market makes many of of its most significant decisions on the value of the U.S. dollar.
It should be noted that extreme movements in the price of gold tend to attract the interest of currency traders, and usually push the dollar inversely.
Most U.S. data reports come out at 8:30 am ET – others released later (between 9 and 10 am ET).
Canadian data reports are also made available in the morning, usually between 7 and 9 am ET.
There are also a few U.S. economic reports that variously appear at noon or 2 pm ET., which adds some excitement to the New York afternoon market.
The daily trading operations of the European financial centres begin to wind down around noon ET.
The London, or European close, as it has come to be known, can often cause volatile swings in price action.
Most days, market liquidity and interest decline significantly in the New York afternoon, which can make trading difficult.
The New York afternoon market doesn’t play out consistently from day-to-day, necessitating that traders remind themselves of the lower liquidity conditions, and trade accordingly.
Currencies are, for the most part, macroeconomic securities that fluctuate in response to wide-ranging economic and political developments, unlike stock prices that are subject to individual corporate results.
I am not aware of a forex news indicator.
If you are, please let me know here.
For the other important times to pay attention to, please refer to the #3 strategy at this link:
There are six times of the day when you should be close by your computer to watch for swing points.
You will see them at that link.
There is a trader in Seattle who only trades the London close, which is ~8:30 am PT Seattle time (11:30 am ET).
Given that she lives on the west coast of the U.S., she is able to get her trading out of the way in the morning, and then enjoy the rest of her day.
No matter where you are on this wonderful planet of ours, you will find at least one of those six times that works best for you.
Fixed-income or bond markets have an intuitive connection to the forex market, given that they are both heavily influenced by interest rate expectations.
However, most attempts to establish a viable link between the two markets on a short-term basis are interrupted by the short-term market dynamics of supply and demand.
Depending on shifts in interest rate expectations, the forex market sometimes reacts first and fastest.
At other times, the bond market reacts to interest rate expectations more accurately, with the forex market having to catch.
Currency traders should diligently monitor yields of the benchmark government bonds of the major-currency countries so that they can be better positioned to understand the expectations of the interest rate market.
Changes in relative interest rates (interest rate differentials) have a direct impact on forex markets.
The vast majority of currency trading takes place in the U.S. dollar pairs.
However, an alternative to trading the dollar is offered by cross-currency pairs – such a pair, known simply as ‘cross’ or ‘crosses,’ being any currency pair that does not include the dollar.
Cross rates are quoted independently, even though derived from the respective dollar pairs.
Traders can more directly target trades to specific individual currencies to take advantage of events or news by trading crosses.
The most actively traded crosses include the three major non-dollar currencies (EUR, GBP, and JPY).
They are known as euro crosses, sterling crosses, or yen crosses.
On the other hand, the major currency pairs include the dollar on one side of the pair’s construction.
The naming conventions for the major currencies are derived from the International Standardization Organization (ISO) codes for each currency.
The same holds true for the crosses.
You should get into the habit of following market-moving information, such as:
Overnight Changes – the effect of new data that came out, anything that was said, and the impact on currency pair behaviour.
Other Major Market Movements – what happened and why.
Major News Releases – like Fed rate announcements, retail sales reports, and Fed speeches; anticipate such news one week in advance.
Technical Analysis of Currency Pairs in Multiple Time Frames – notice the effect of new data and news on currency pair behaviour.
News and Geopolitics – such as elections, military disturbances, policy statements, and political upheaval that may affect currency movements.
These are the broad grouping of information and news that reflect the macroeconomic and political fortunes of the countries whose currencies are being traded.
Usually, economic fundamentals are what is being referred to – based on:
Economic data reports
Interest rate levels
International investment flows
International trade flows
It is usually the case that macroeconomic factors, such as interest rates, market sentiment, and relative growth rates, determine the overall direction of currency rates.
But, as we all know, currencies seldom follow a straight line, meaning short-term price fluctuations can be traded by resorting to technical analysis.
However, that is a subject for another blog post.
And then there is the weekly commitments of traders data which shows you what the large and spec traders are up to. I have written about that before in these blog posts:
Avoid carrying a position into a news release, because price can gap sharply after the news comes out.
And then there’s the fact that price can adjust 15 to 30 minutes beforehand – not necessarily in your favour.
It’s best to trade the aftermath of major data releases, once price settles down, when technical analysis gives you a clearer picture of what’s going on.
And, it’s a good idea to be around your computer during the release time, rather than finding out what happened hours later, and potentially missing out on the ensuing move.
It is to your advantage to formulate an opinion based on fundamentals before engaging a trade.
Having knowledge of economic growth trends or interest rate expectations will put you ahead of the curve when it comes time to put a trade on.
Of course, awareness of support and resistance levels is part of the game too.
Your trade plan should allow for unexpected news or price adjustments.
In other words, you should always have a contingency plan in place, before you enter a trade,
Considerations might include using ‘buy stop orders’ or ‘sell stop orders’ in conjunction with OCO orders.
If your platform doesn’t support OCO orders, you can simply collapse the other side of the trade, once you are convinced price is moving convincingly in one direction or the other – but not until.
Case in point… trying to get in at market is sometimes dicey – especially when prices are moving faster than fast – as in the effects of news releases or breaks of key price points and/or technical levels.
Part of this can be attributed to the ‘latency effect’ of engaging a trade over the Internet – i.e. the time lag between the price on your forex trading platform reaching your computer and your trade instructions reaching the platform’s server.
I personally like the idea of using a buy stop (or sell stop) order, thereby forcing the market to do all the work for you, and taking you into the trade when price moves through your entry point.
This just means that the market has to convincingly prove your underlying assumption as to which way price is going to go.
Even when your trade is on, don’t fall asleep when it comes to events and news, which may influence your position.
Stuff can happen at any time – like the recent UK election results that saw the pound sterling plummet.
Luckily I exited my trade before that happened, because I happened to be watching the news.
News doesn’t care about your trading plan.
It can come out at any time.
It’s the astute trader who reacts decisively.
Be on the lookout for upcoming data or events, which you may have a conviction for one way or the other.
You will have to adjust your expectations, depending on the outcome of such news.
It’s best to anticipate upcoming data reports and news events, before opening a position, and then be prepared to take action, depending upon complementary, or not so much, the information is to your trade.
It’s all about anticipating outcomes, and planning well ahead.
Planning is half the battle.
Combined with technical analysis, that just makes trading a whole lot easier and much less stressful.
Released mid-week the first week of every month, the ADP Employment report is a measure of employment derived from an anonymous subset of roughly 500,000 U.S. businesses.
It is a monthly estimate of private nonfarm employment among companies in the United States with one to 49 employees.
The data is collected for pay periods that can be interpolated to include the week of the 12th of each month, and processed with statistical methodologies similar to those used by the U.S. Bureau of Labor Statistics to compute employment from its monthly survey of establishments.
Due to this processing, this subset is indicative of national employment levels.
Many analysts use this release to assist their own analysis in an attempt to predict the NFP figures on Friday.
Released the first Friday of the following month (with occasional exceptions) at 8:30 am ET by the U.S. Department of Labor, U.S. NFP Employment measures the change in the number of people employed during the previous month, minus the farming industry.
It is the most important data and a major economic indicator in the U.S.
It presents the number of people on the payrolls of all non-agricultural businesses.
The data is used to assist economists and policy makers in determining the current state of the economy, and predicting future levels of economic activity.
A rising trend positively affects the U.S. dollar.
Job creation is an important consideration when it comes to economic health, because consumer spending, which is highly correlated with labour conditions, makes up a large part of GDP.
This report is the first of the month that has anything to do with labour conditions, and it can result in big surprises.
Pay attention to changes in the unemployment rate.
From a trading perspective, it’s best to wait five minutes after the release, at which time you’ll get a much clearer picture of where price is going.
After all of the numbers have been released, wait for the market to push and wait patiently for a decent retracement, before getting in.
Look for recent support and resistance areas for entry, as high impact news with various components are extremely volatile.
Those who are patient will always get a chance to enter with a much better entry point.
In the three forex trading charts that follow, you will notice how dramatic price action can be when the NFP news comes out.
It’s best to stand aside, and trade when price action settles down, and picks its direction.
You will also notice the four price patterns embedded in the bottom left-hand corner of each chart that I promised at the outset of this blog post.
They represent possible price moves that can result from the release of news.
(Image via https://www.prorealtime.com/en/)
(Image via https://www.prorealtime.com/en/)
(Image via https://www.prorealtime.com/en/)
The GBP/USD pair didn’t take too kindly to the results of the U.K. vote June 8/17.
(Image via https://www.dukascopy.com/)
Moral of the Story: Be aware of news events in the offing that may have a direct impact on the currency(s) you are trading.
In the example above, it was the prudent thing to do to stand aside, while the election results were coming in.
http://www.gaincapital.com/ (Mark Galant)
https://www.forex.com/en-ca/ (Brian Dolan)
Banks exchange different currencies in the interbank market, which is the top-level foreign exchange market.
The banks either deal with each other directly, or through electronic brokering platforms.
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I hope you found this Best Forex Calendar: Awesome Trading Forex News Strategy blog post to be useful, and that you are now better informed as to how to deal with news that affects your forex trading.
Trading the news is an important aspect of your forex trading, so you have to be aware of the pitfalls of doing so.
If you still have questions about what I have presented here, please feel free to contact me here.
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About Peter R. Bain
Peter R. Bain
I am a speaker, trader, writer, aviator, car nut, Harley enthusiast but, above all else, I am here for you at TradingSmarts, which I founded some 15 years ago.
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