Exploring the News-Trading Strategy
News trading is a fundamental analysis strategy based on the upcoming economic calendar.
News trading focuses on short-term periods and is often used for trading 1-minute, 2-minute, and 5-minute binary options (Turbo Options). Most news releases have a short-term impact, though some can affect global markets in the long term. The goal for every news trader is to track important news releases and trade in the direction of the news impact.
📈 Event-Trading and Market Expectations
Every major economic, social, political, or military event influences global financial markets. Even something like a weather forecast can significantly impact markets—especially energy assets. Some events have a tremendous effect, while others have a minor impact. What matters isn’t just the event itself, but equally what the market actually expects regarding that event.
Three Factors Affecting News Trading
■ The nature and significance of the news release (for example, an important macroeconomic event like an interest rate cut)
■ Market expectations about this event or news release
■ The difference between market expectations and the actual event
What Does Market Expectations Mean?
Market expectations mainly refer to the forecasts and research conducted by specialized analysts. These analysts—whether working for financial companies, government bodies, or independently—can influence all types of market participants.
Example of an Important Macroeconomic Event
Suppose we are trading Forex, and the market expects the ECB (European Central Bank) to cut Euro interest rates by 0.25% (hypothetically from 0.50% currently). Suddenly, the ECB does not cut rates but instead signals a future rate increase due to inflation concerns.
Can you imagine what happens next?
The Euro, against other major currencies like the USD, will likely gain around 2,000 pips within minutes. The following chart illustrates the impact of important news on EURUSD.
📰 The Two Types of News Trading
News trading involves two distinct styles:
■ Directional Bias News Trading
■ Non-Directional Bias News Trading
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Directional Bias News Trading Strategy
In directional bias news trading, the price of a financial asset is expected to move strongly in one direction after a specific news release. Traders must quickly assess the impact of the upcoming news and place a Call or Put Option order at high speed. Some traders may enter a trade before the actual news release, but this approach can be very risky. These early traders typically monitor market sentiment or other signals before the release.
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Non-Directional Bias News Trading Strategy
This style involves placing two opposite trades simultaneously. It doesn’t rely on the news outcome, only on the market’s reaction to the news. For example, if important Euro-related news is expected, you might place two trades on EURUSD at the same time:
EURUSD currently at 1.3600
- Trade 1: Target EURUSD at 1.3650
- Trade 2: Target EURUSD at 1.3550
⚠️ Risks
News releases can have a neutral effect—in that case, both trades may lose.
There is also the risk of stop hunting, where intentional price movements aim to trigger clusters of stop-loss orders.
📣 Major Economic News
Here are some important economic news releases for news traders:
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Interest Rate Changes – Interest rates affect every financial market. When an economy’s interest rate rises above expectations, it usually negatively impacts the stock market but positively affects the domestic currency.
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Consumer Price Index (CPI) or Inflation – Closely linked to interest rates, inflation has a strong influence on all financial markets.
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Unemployment Rates – Changes in unemployment also correlate with interest rate trends and impact financial markets.
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Gross Domestic Product (GDP) – A very important macroeconomic indicator for all markets.
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Trade Balance
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NFP Report (Non-Farm Payroll)
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Retail Sales
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Industrial Production
💱 News Trading and Forex Currencies
The Forex Majors are the most popular currencies to trade using a News-Trading strategy::
1- European Currency, Euro
2- US Dollar
3- Japanese Yen
4- British Pound Sterling
5- Swiss Franc
6- Australian Dollar
7- Canadian Dollar
8- New Zealand Dollar
These are the most interesting currency pairs for news trading:
- EURUSD | EURGBP | GBPUSD | USDJPY | EURJPY | USDCAD
🔗 Learn the basics of the Forex Market: » The Forex Majors | » The Forex Minors or Crosses
🪙 News Trading and Commodity Assets
Many commodities are suitable for news trading, primarily energy assets, but also popular metals and several other commodities.
Energy Assets for News Trading:
1- Oil Trading
2. Heating Oil Trading
3- Gas Trading
4- Natural Gas Trading
Metals for News Trading:
1- Gold
2- Silver
3- Platinum
Other Assets for News Trading:
1- Soya
2- Coffee
3- Grain
🗞️ Reading the Signs – News Trading Based on Empirical Evidence
Major upcoming news and events are often unpredictable, but sometimes you can read signs or even make forecasts based on empirical observation.
For example:
Suppose you want to trade the upcoming earnings report of an e-commerce company. You can use online tools to measure website traffic over the past few months and compare it with last year’s data. Higher website traffic will likely lead to higher sales conversion and, therefore, a better earnings report.
Trading financial markets based on empirical evidence and data has proven highly profitable in the past. Large hedge funds regularly use empirical evidence.
Trading the News via a Forex Economic Calendar
To trade upcoming news, you need a Forex economic calendar. Many economic calendars are available online.
Here are some options:
🔗 » FxStreet.com/economic-calendar | » ForexFactory.com/calendar
When Not To Trade the News
News trading is a highly selective strategy. There are good times to trade and times when you should avoid trading altogether.
Avoid trading the news in these cases:
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During important speeches or meetings—you should trade only when you know the event’s outcome, not before.
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If you are unsure about the effect of a particular macroeconomic release.
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If the news release isn’t a high-impact event.
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If the economic indicator’s result exactly matches market expectations—this usually leads to a neutral outcome, so it’s better to avoid trading.
◙ News-Trading Strategy
By G.P. for ForexExperts.net (c)
🔗 READ MORE
» Introduction to Trading Strategies
♞ DAY-TRADE STRATEGIES
» Falsebreak Candle
» Bollinger-RSI
» Stochastic Day-Trade
» Breakout Strategy
♚ SWING-TRADE STRATEGIES
» Riding the Trend
» Moving Envelopes
» MACD Swing
♜ SCALPING STRATEGIES
» Stochastic Scalper
» Bollinger-RSI Scalping
» Hit-Run Trading
♟ STRATEGIES FOR BEGINNERS
» News-Trading
» Follow-The-Trend
» Support and Resistance
» Fibonacci Retracements
» Stochastics Trading
» Chart Patterns
💱 MARKET CORRELATIONS
» US Yields and USDCHF
» Crude Oil and Forex
» USDJPY and US Stock Indices
» AUD and Gold Price Correlation
