Today if somebody were to ask you about the role played by fundamental analysis and technical analysis in forex markets, you would be in a reasonably good position to explain it in perspective. Not only that, you have also learnt of the nuances of technical analysis in relation to several technical indicators like, Fibonacci, MACD, Stochastic and RSI amongst others. All this is fine. However in the final analysis it is your own distinct ability to interweave the data output of these technical indicators alongside other parameters like for example fundamental analysis that would indeed be crucial to the success of your forex trading strategy.
Alongside this facet of forex trading is the concept of trading on the basis of news releases. It is partly a practical manifestation of fundamental analysis. It is often the practice of governmental agencies and central banks to release macroeconomic information from time to time. This is what is called “news releases.” For example, these announcements may be with reference to country-specific GDP data, Unemployment figures, change in interest rates or Non farm Payroll data. Other news releases include data on inflation, Retail Sales figure, Consumer Price Index and Business Confidence Surveys. Any of these data releases has the potential to impact currency trends in the forex market. However the impact of these announcements on market prices of currencies varies greatly. Some of these news releases may have a strong and immediate effect on currency prices characterized by sharp increases or decreases in exchange rates. Yet others may affect the market marginally and gradually and that too over a longer period of time.
However news releases need not always be in the domain of fundamental analysis. In other words, it could also evolve from areas not related to fundamental analysis. For example, sometimes experienced technical traders analyze charts and graphs and search for repetitive patterns. Based on this, they publish their prognosis of future market movements. This could also turn out to be a compelling commentary on future market trends. No matter whatever be the news releases, interpreting them correctly is indeed an art, especially as all news pertaining to data releases have the potential to change currency trends at least in the short term.
Now the question arises, how would you keep yourself abreast of news releases? The practical way out would be to subscribe to a forex news service. Essentially a good forex news trading service should not only provide you with news releases, but also pin point which of those are likely to provide a good opportunity for trading, and which of these are unlikely to move the markets. Although there are several forex news traders and trading services on the internet, be sure to choose one that is most accessible and known to provide consistently good returns. That is something easier said than done. However if you participate in forex forums and talk to other forex traders, you would no doubt get an idea on which forex news subscription service to select. In order to have a better understanding of future currency market movements, you need to have a reliable forex news subscription service provider. In other words, a lot depends both on the accuracy of information received as also on the timely receipt of news releases. Therefore you should preferably go in for a trial subscription with the news service provider and check out if you indeed get the information on time. Remember that delayed receipt of news releases is simply useless.
If you keep yourself updated with forex news, you are in effect several steps ahead of others in the foreign currency market. This statement is not without reason. Although forex market has a high volume of business and liquidity, it is nevertheless heavily leveraged. Therefore news releases have the potential to cause price fluctuations. So if you are in tune with news releases you are that much ahead. Remember that even news from countries other than those of the currency pair you were trading could significantly impact your trading strategy.
Most news releases have the potential to cause short term fluctuations in the market. So “timing” is the key in the context of trading on news releases. It could be that the market could correct itself after a little while. So you got to quickly capitalize on the trade before the correction happens. In short, you got to be really on your toes when trading in news releases. But you have to guard yourself against trading on rumors. If you do so it would be a great mistake. Similarly you have to guard yourself also from overtrading simply because a news release has probably indicated the possibility of indulging in a favorable trade.
In recent weeks we have seen the spectacle of mammoth financial institutions being plagued with problems of liquidity, falling revenues and sagging share values. Fortunately governmental efforts in consolidating or restructuring these institutions one way or the other will certainly bring relief to carry forward trade in currency markets. So you could indeed look forward to healthy forex markets in the years to come.