What is Forex News Trading, and Why is it important to you, as a trader?

Forex News Trading, or Fundamental News Trading, is the primary driver of currency market movements. Forex market is driven by high impact news events, and by understanding how to take advantage of these events, you can increase your profitability and avoid many costly mistakes. Many novice day traders come to a rude awakening realizing the importance of news events only after seeing a perfectly profitable trade turn into a huge loss in a matter of seconds, whereas experienced traders add to their daily profits in a consistent manner, almost like clockwork… (as a matter of fact, most high impact news releases are scheduled at the same time every month, so yes, like clockwork.)

Forex News Trading, in a nutshell, is basically taking advantage of market volatility in the event of a surprise. Almost all high impact news events have a Forecast, or Consensus Number, which is usually an average number derived from a survey of economists, usually done by news agencies such as Reuters or Bloomberg. This Forecast number, represents what the market as a whole is expecting the Actual release to be; therefore, in the event that the Actual Release turns out to be different than the Forecast, we have a surprise in the market… Since Forex trading is basically Futures Trading of currencies, market speculators will price in the surprise immediately in the direction of the surprise, and create an opportunity for traders to make some pips.

News Surprise Factor, Deviation

In order to trade these news events successfully and profitably, traders must concentrate on high impact news releases with high probability of A) Moving the Market and B) Predictable Reaction .

  • Moving the Market: Since there are literally hundreds of news events scheduled around the calendar month, it is important to trade only the high impact ones that are most likely to move the market. Do not waste time on ALL news events since they may or may not move the market, and because Forex market is sometimes sentiment driven, lesser news reports might not have adequate effects to counter the predominant pre-market trend.
  • Predicatable Reaction: Based on historical reaction, high impact news events will generally move a certain amount of pips (or points) if the surprise difference from the consensus number to the actual release is by a certain deviation. For instance, if the UK Retail Sales Consensus is at 0.5% and we are looking for a Deviation of 0.6%, we’ll BUY GBP/USD if we get a 1.1% release and SELL GBP/USD if we get a -0.1% release.

Therefore, as Fundamental Forex Traders, we always pick the right news releases to trade, wait for the right deviation, and for the right amount of pips in profit.

As a Novice News Trader, What should you do next?

  1. Look for an economic Calendar such as Econoday or Forexfactory.
  2. Get a news wire service such as TradetheNews or use the freebie from Forexfactory (you need to refresh the page at release time).
  3. Be at your trading station at least 30 minutes prior to high impact news events and watch market reactions.
  4. Record market reaction, such as how many pips did a certain currency pair move based on the difference of forecast to actual release.
  5. Repeat until you have collected 12 ~ 24 months of data.

There is actually an easier way, since I’ve done these steps already. I have a list of tradeable news releases along with a “safe” deviation and expected pips range. You can find more information from my Ebook “Definitive Guide to Fundamental News Trading“.

Fundamental News events are the primary driver of the currency market. A series of fundamental news in the same direction, such as better US Job Report, better US Housing Report, better US economy report, etc… will tend to create a long term trend of US Dollar rally… By understanding these news events, a trader could easily add 20 ~ 50 pips of profit daily to his/her account.

 

Comments

  1. Thank you for all the good information you publish each week. Your site is one of the main resources I read each day. I have learned a lot from you. Please keep up the good work!
    I am a part time trader. I hope to move into this full time when I retire from my “regular” job.

    Thank you.

  2. market today eur / usd closed on riding conditions, what is the influence of the G8? when the market will be opened, if possible go down or up?
    thank you sir ..

    • I believe EURUSD has reached a technical support level of 1.2650, there are buyers in the market at the moment. Of course I am ultimately bearish but will wait for a pullback before selling some more. So look at the resistance levels for EURUSD and start planning 🙂

  3. navneet says:

    pls guide me usd is down or up in next week

  4. hi henry
    am a fresher in trading i want u to enlight me more on other beneficiary terms i can use in trading. Thx

  5. shappons says:

    hi henry,
    forexfactory clogs up at news releases.
    could u pls recommend any news sites where the releases are transmitted instead of everyone jumps onto the forex calendar?

    also, which news release sites include other countries’ event besides the US?

    thank u
    shappons

    • You can get my Currency Strength Meter, I broadcast the release figures… if you want to get in at the precise time, you’ll probably need to get a paid subscription, try Tradethenews.com.

  6. hello sir,
    you said high impact news events and watch market reactions.

    how can i consider which news is important and have a high impact.

    regards

  7. Hi,
    Your currency strength meeter has been really helpful. But I cant find it on your page for update. Please what is happening?

  8. sammyfelix says:

    i check all i need to know about you but now how would i need to pay to have access to all your trading tools and trading room

  9. hi henry
    ur trading tips r helping me alot
    wer can i get the image file that contain main news, deviation and pips amt of pips that wil move?

  10. Hello, does the news profiteer include all the possible basics for news trading?

  11. Hello Henry, thank you for a good job. I will appreciate it if you can recommend reliable forex brokers that is good for news trading. I am a news trader. After mastering the concept of news trading, my trading result changed astronomically. The technique I use is able to help me generate over 100% in a month.

    The problem I have been facing now is that the 2 brokers I had used, stole my profits and frustrated me by not attending to my complains. These are Russian brokers (liteforex and instaforex)

    I will appreciate it if you can help me out for I have now seen thru experience that even when you now get your trading strategy right, your choice of broker can still make or mar your trading experience. I have stopped trading for now until am able to get a better broker. I need your recommendation please.

    Thanks Henry and be blessed.

    • if you trade spike trading exclusively, then you are out of luck because no matter where you go, you will have the same problem. However, if you learn to trade using retracement trade and understand fundamentals, then any broker is fine…

  12. Henry, are there any performance history figures available for your previous "news trade calls" ? Also, when will your live signal room be opening ?
    Thanks………kl

  13. Pl. explain clearly what do you mean by deviation & also what do you mean by buy 0.3% and sell at 0.7% etc.

    • Deviation means the difference between the release number and the forecast. If forecast is 0.3%, and the actual release is 0.7%, the deviation is 0.4%, or 0.7% – 0.3% = 0.4%.
      We are always looking for certain amount of deviation in order to get into a trade, so if we are looking at 0.4% as the deviation to buy or sell, with the forecast at 0.3%, a 0.7% (0.3% + 0.4%) would be a BUY and a -0.1% (0.3% – 0.4%) would mean a sell.

  14. Hi Henry i just want to say thank you for the way you help us with your signal,though am still trying to understand it clearer but keep it up when i start being successful in it i will make sure i locate you where ever you are and give you a golden thank-you hand-shake but till then keep on making it more clear to us if possible thank a lot!!!!!!

  15. hi henry

    can you please send me buy and sell signals and what will the procedure for that thanks
    tanveer

  16. Hi henry
    what would be the trading on NZD/USD on NFPR news,if want to trade

  17. Thanks so much for all these your invaluable resoures.Pls Henry how can idownload some of your video am finding it difficult espeacially that currencymeter utorial,so that i can go over it again and again.
    Thks waiting for ur response

  18. Donny Lim says:

    Henry,
    What is actually cover on your news trading package (newsprofiteer)and how much is the fee ? Do you trade live with us if subscribe newsprofiteer ?TQ

    • I am planning a live-traderoom program soon, once it is ready, I will send a private invite to all of my subscribers, make sure you are receiving my newsletter if you want the invite.
      As far as the Newsprofiteer Ebook, it does not include the traderoom.

  19. Hi Henry,

    I was just wondering how you decide which currency pair is best to trade for different News releases?

    Thanks

    Jay

  20. Alejandro says:

    Hi Henry: what’s your news provider? I wonder since I ercently saw a video of yours, trading the NFP, and you let an audio run narrating the news coming out.
    Or for what it matters, whatn news provider would you recommend?

  21. thank you for your news enlightment,you have impacted me much on news trading,how can i purchase your ebook,please give me the link,very important and urgent and i hope to have a lunch with you in bahamas one day.
    thank you
    junaid ghana.

  22. hi henry where can i find the pre trading new release eastern time zone so i can better determine to entering the market thanks

    Robert

  23. God Bless you!

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