Forex trading conditions nowadays are such that traders can use various strategies they specifically feel to be convenient. The abundance of information and statistical data fully open to the wide public does not always really helpful. Sometimes the multitude of news does more harm than good, making the analysis of the current market situation more complicated. The model that traditionally calls for traders to closely watch the fresh news and categorize them by importance is already slightly outdated, let alone a number of rather serious and unjustified risks inherent in news trading.
Almost all Forex novices seem to think that using news in their trading strategies is a must, and this is the only way to success. This, however, is not quite true. First and foremost, bear in mind that by relying on statistical and analytical data, players start leaving out the important psychological cues that essentially determine the dynamics of market indicators and quotes of assets. This is why betting on the news may inflict dramatic financial losses. It is worth looking into why this is happening.
Traditionally, news is viewed as fully reflecting the real changes in the market, as if the market is following the news, which in reality is emphatically not true.
For example, let’s see how currencies react to incoming statistics. You can never be a hundred percent sure where the USD rate would go if the stats on the county’s employment turn up negative. There is no direct correlation between the two. Essentially, the only rule that may prove effective in this case is the “main demand/supply principles + investor psychology = market dynamics” formula. Please note the prominent absence of any explicit reference to news. It may exert pressure on a trader’s psyche, but that is it. It is the investors’ reaction to the incoming news that forms the general mindset; this, however, is only a secondary factor. And sometimes it so happens that global newsbreaks have no effect whatsoever on the sentiment on the market, while tiny changes immediately lead to shakeups.
All that said, the Forex news should not be written off completely, after all. One way or another, the major conditions reflected in the news do not pass completely unnoticed, even if establishing some clear-cut dependence is still impossible. A piece of advice to Forex newbies would be to avoid building their trading strategies solely around news.
The events in the news may affect the markets even before being officially published. The newsbreaks themselves prompt investors to ponder and speculate on what changes in the market quotes they may bring. It is considerably more convenient to use this mindset of market players as a starting point of what we call non-news trading. It is best to closely follow investor reactions and make your moves based on them.
Besides, another important consideration in favor of the non-news trading is the fact that the analytics and expert reviews very often turn out to be erroneous as in not matching the real data, which makes news trading even more unreliable. This is what they call a human factor, and it always causes quite a large number of problems. Traders are rather disciplined personalities. In case analytics says one thing while the reality points to exactly the opposite and calls for closing patently losing trades, they would wait for the imminent trend change that had been reflected in the flash prediction. The change does not happen and it means they bet on the wrong horse.
Therefore, non-news trading is safer and more logical as far as analysis of the current market situation is concerned, and as such is recommended for inexperienced traders and novices.
Almost all Forex novices seem to think that using news in their trading strategies is a must, and this is the only way to success. This, however, is not quite true. First and foremost, bear in mind that by relying on statistical and analytical data, players start leaving out the important psychological cues that essentially determine the dynamics of market indicators and quotes of assets. This is why betting on the news may inflict dramatic financial losses. It is worth looking into why this is happening.
Traditionally, news is viewed as fully reflecting the real changes in the market, as if the market is following the news, which in reality is emphatically not true.
For example, let’s see how currencies react to incoming statistics. You can never be a hundred percent sure where the USD rate would go if the stats on the county’s employment turn up negative. There is no direct correlation between the two. Essentially, the only rule that may prove effective in this case is the “main demand/supply principles + investor psychology = market dynamics” formula. Please note the prominent absence of any explicit reference to news. It may exert pressure on a trader’s psyche, but that is it. It is the investors’ reaction to the incoming news that forms the general mindset; this, however, is only a secondary factor. And sometimes it so happens that global newsbreaks have no effect whatsoever on the sentiment on the market, while tiny changes immediately lead to shakeups.
All that said, the Forex news should not be written off completely, after all. One way or another, the major conditions reflected in the news do not pass completely unnoticed, even if establishing some clear-cut dependence is still impossible. A piece of advice to Forex newbies would be to avoid building their trading strategies solely around news.
The events in the news may affect the markets even before being officially published. The newsbreaks themselves prompt investors to ponder and speculate on what changes in the market quotes they may bring. It is considerably more convenient to use this mindset of market players as a starting point of what we call non-news trading. It is best to closely follow investor reactions and make your moves based on them.
Besides, another important consideration in favor of the non-news trading is the fact that the analytics and expert reviews very often turn out to be erroneous as in not matching the real data, which makes news trading even more unreliable. This is what they call a human factor, and it always causes quite a large number of problems. Traders are rather disciplined personalities. In case analytics says one thing while the reality points to exactly the opposite and calls for closing patently losing trades, they would wait for the imminent trend change that had been reflected in the flash prediction. The change does not happen and it means they bet on the wrong horse.
Therefore, non-news trading is safer and more logical as far as analysis of the current market situation is concerned, and as such is recommended for inexperienced traders and novices.
تبصرہ
Расширенный режим Обычный режим