What is Forex News Trading And Why Is It Important To You, As A Forex Trader?

Forex News Trading, or Fundamental News Trading, is the primary driver of currency markets. 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 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 loss in matter of seconds, while experienced Forex traders anticipate the move and 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, very much like clockwork.)

Forex News Trading, in a nutshell is: a trading method designed to take advantage of market volatility during surprise news events…

The key, of course, is the term Surprise. All you have to understand are the three things that every high impact news event comes with:

  1. Forecast or Consensus: This is a figure derived from a survey of economists, usually done by news agencies such as Reuters or Bloomberg. This Forecast number, represents what the market expects the release to be. For example, the US NFP (Nonfarm Payroll) is expected (or forecasted) at -320K, which represents most economists think (estimate, guess) that U.S. economy for that particular month has lost 320,000 jobs.
  2. Previous or Past: This is the actual figure for the previous month. Sometimes market looks at the current Forecast versus the Previous release to gauge improvement. This figure is also important because sometimes we will get a revision, or modification of the past release, which could also surprise the market. For example, let’s say that last NonFarm Payroll was at -467K, and this month we got a revision to -300K, which means last month’s NFP was not as bad as market expected, and this could lead to re-positioning of long-term trades and possibly add demand for the USD.
  3. Actual Release Figure: This is the actual release of the news from official sources. In the case of NFP, it comes directly from the BLS (Bureau Of Labor Statistics). If this figure is different from the Forecast number, then we have a Surprise that is definitely market moving. And News Trading takes advantages of this surprise.

Of course, depending on the actual release, we could get a little surprise, or a HUGE SURPRISE. It all depends on the deviation, which is the difference between the actual release and the forecast figure. For instance:

Forecast -320K
Actual -200K
————————
Deviation 120K

*** Deviation is simply the difference between the Actual and the Forecast figure.

Let’s take a look and see how to plan for news trading, we’ll use the same example of NFP, here are the figures:

US NFP (Nonfarm Payroll) Employment Change
Forecast: -320K
Previous: -467K

Using historical recommended Triggersheet and based on my News Trading Start-Up Guide, Here’s the trade plan:

Based on a surprise factor, or deviation of 70K, we are going to BUY USD if we get a positive surprise (-320K + 70K = -250K), or we”ll SELL USD if we get a negative surprise (-320K – 70K = -390K, rounded off to -400K).

The deviation is determined by looking at historical data of the past five years. This is the minimum deviation required for the market to move 70 pips or more for at least 70% of the time. In other words, study every NFP releases for the past 5 years and look for market movements of at least 70 pips after the news release. Then calculate all of the deviations and figure out the least amount needed for the market to move 70 pips, at least 70% of the time… You can download my own Triggersheet along with a list of tradable releases by CLICKING HERE.

 

CASE STUDY: US Nonfarm Payroll Employment – August 7, 2009

Forecast: -320K
Previous: -467K
Trading Plan: BUY USD -250K or better / SELL USD -400K or worse

Results: -247K BUY Trigger Hit

Important Note: In the example above, I decided to go with GBPJPY instead of USDJPY as both pairs react to the news in the same direction, but GBPJPY usually moves more due to the volatility of GBP. This is advanced news trading based on experience and my special trading methods. Watch the video below for more information and don’t forget to read my news trading startup guide.

 

Thanks,

 

Comments

  1. Sayyed asghar says:

    Hi herry lue I use ctrader platform for trade , do you have cnt ea for this platform?

  2. Grailemeks says:

    I think the whole lots of these information , has played a great significant correction to my newer style of fundamental analysis.But yet to start implementing all the knowledge gotten in practice

    Thank Henry Liu

  3. luis urquieta gomez says:

    And one question , do you also consider emerging markets news data like GDP
    when trading , thanks a lot

  4. omisope oluwashina says:

    hi henry
    pls as we know currency pairs react differently to news so how do we know the currency pair that reacts according with the results of the deviation, before the news release, think best is to just say the set of currncies that react according to deviation

  5. Ricky Ekaputra Foeh says:

    Very good Analysis

  6. my query is when ever there is a news expected to be released there is a high fluctuation in the market where both the trades are executed i.e buy and sell
    is this fluctuation manipulated by the broker or by the exchange from where the broker taking rates
    that way no one can trade on news
    somewhat with ref to gerhard comment of 22 january.
    there must be some solution to it .kindly update the environment

    • This is one of the reasons we use CNT EA to trade spikes. CNT EA immediately cancels the 2nd order when the 1st one is picked up, which is difficult to do if you were trading it manually.

  7. Aliakbar says:

    Hi Henry,

    Thank you for your good system and share this for all traders.
    I have some questions about how calculate 2H-50+ ,Range , Direction , Spike, if it is possible for you tell formula of this parameters.
    And a question is that the pending order is not guarantee from some brokers in High impact NEWS time. and sometime orders have large slipage (I work in alpari broker).
    Please help me and others traders how dose we done for this problem?

    Best Regards,
    Saeed

  8. redishetti panduranga rao says:

    Dear Henry Liu & Dear Kelvin Ching,

    Today I could install the EA on to my Platform. The system itself choose the folder where to install. But after installation and finish, the EA is not visible under the Navigation, Experts of the platform.

    You both may be busy. I will wait for your guidance.

    Pandupr2

    • Pandupr2, this seems to be a typical issue when you try to install the EA in a MT4 platform using build 600 and above. We appreciate your patience as we’re trying to have a fix/update available as soon as possible.

  9. redishetti panduranga rao says:

    Dear Henry & Dear Kelvin,

    Please show the correct way of loading the EA onto my MT4 Charting. I am having MT4 accounts with Aplari UK & admiral UK, but I am unable to load the EA on any platform. These platforms are of build 600 compatable. When ever I try, a message pops up saying that the destination forlder is not the correct one. Please help me.
    Pandupr2

  10. Hi Henry Lui,

    Why does the CNT EA do the following all the time (example):
    Todays Event CA BOC Interest Rates Decision at 10:00

    Just before the event:
    09:59 AUDCAD 0.9718
    09:59 EURCAD 1.4878

    Action of the EA:
    2014.01.22 12:00:08 CNT_EA EURUSD,M1: delete #876038 sell stop 1.00 EURCAD at 1.4726 sl: 1.4876 tp: 1.4376 ok
    2014.01.22 12:00:07 CNT_EA EURUSD,M1: delete #876037 buy stop 1.00 AUDCAD at 0.9873 sl: 0.9723 tp: 1.0223 ok
    2014.01.22 11:59:42 CNT_EA EURUSD,M1: modify #876038 sell stop 1.00 EURCAD at 1.4726 sl: 1.4876 tp: 1.4376 ok
    2014.01.22 11:59:41 CNT_EA EURUSD,M1: modify #876037 buy stop 1.00 AUDCAD at 0.9873 sl: 0.9723 tp: 1.0223 ok
    2014.01.22 11:59:40 CNT_EA EURUSD,M1: open #876038 sell stop 1.00 EURCAD at 1.4726 ok
    2014.01.22 11:59:39 CNT_EA EURUSD,M1: open #876037 buy stop 1.00 AUDCAD at 0.9873 ok

    Why EURCAD open sell stop at 1.4726 (about 150 pips difference to the value before the event, 09:59 EURCAD 1.4878.
    The same with AUDCAD open buy stop 0.9873 (about 150 pips difference to the value before the event, 09:59 AUDCAD 0.9718.

    Please explain, I don’t understand.
    Thanks in advance,

    Gerhard

    • Hi Gerhard, please check on your EA settings or reset your settings. By default, it should be 15 pips away from the pre-release time. Check if you have it set to 150 pips (maybe you entered 150 to compensate for 5-digit broker?). The only other reason is that your entries were slipped, but it’s unlikely to be slipped by that much.

  11. bako sani sani says:

    Good morning mr Henry i applied the news you sent for uk retail sale this morning but was not in my favour.your release reads sell GBPUSD which i did but lost money.could you please put me through the terms.also how can you help me to build my account to forestall a future recurrence.

  12. Davies Joel says:

    Henry!
    Good day.
    I do not have any comment to post. My problem is that, i want to subscribe with your Live Trading Room. From your website you do not create any form of how someone can subscribe.
    Moreso, my country Nigeria is not allowed to open an PAYPAL account. The only means for me to be able to pay for my subscription is either through VISA CARD or WIRE(BANK) transfer.
    What should i do.
    Below are my details.
    Davies Joel Oyola
    Thanks

  13. chuksoraka says:

    In the above illustration, I did not see you taking into account the actual news release in the analysis. I only noticed that you used deviation of 70k which you said was obtained after observing market for 5 years and the forcast of -320K. So where does the actual news release comes in?

    • chuksoraka, in the above example, the actual release came out at -200K, well above the 70K deviation from the -320K forecast number. Therefore, this news was tradable, since it did hit our expected deviation.

      • chuksoraka says:

        Thanks for the prompt reply.
        I so much appreciate it.
        So could it be that because the -200K is better that the -250K that is why the market was a buy market?
        The “Results: -247K BUY Trigger Hit”, how did you get it?

        • chuksoraka, the forecast is -320K, and the deviation is 70K, so if the actual is -250K(-320K + 70K) or better, we BUY USD. The actual release number came out at -200K, which is 120K better than forecast, so it definitely is a trigger to BUY USD.

  14. Srinivasa Mehar Kumar Rajanala says:

    Sir
    I am a member of CNT-outstanding organization for traders
    I thank U for that as per your saying I downloaded your CNT_EA but I got a doubt do I have to install this EA on each and every chart according to their concerned news release or is it enoudg ro get installled on one chart in MT4 terminal.
    For example for ECB press conference do I have to install EA on EUR/USD
    For GBP related Highimpact news do I have to install EA on GBP/USD xhart.
    I request you to kindly clarify my doubt.

    • Hi Srinivasa, you only need to apply the CNT EA to one chart. The EA will trade all pairs and news releases regardless on what pair chart you install it on. However, we do recommend to setup into one of the major pairs, like EURUSD, GBPJPY, USDJPY, etc…

  15. Davies Joel says:

    Henry! There is no way i can register for PAYPAL in my country.Moreso, wire transfer is very expensive in my country. Very painful, you do not accept VISA DEBIT CARD which is the best means for me to use and and make all my subscription deposit. I am very much interested in your Live Room Trading Signal. Profit Monger accept Debit Card which one of my friend happen to be a subscriber.But, i want to be with you. I love all your news alert and others
    Thanks
    Davies

  16. mohd khusairi says:

    i know that ur currency strength meter has a news broadcast and the final result news will be shown.my question is weather the final result news at currency strength meter is same as the time release news or delay in couple seconds with real time news release? by the w.ay thx for given us a big time during trading with smart move trade with news.

  17. Hi, I am new to news trading. I wonder whether you can provide a link to Reuters’ or Bloomberg’s forecast numbers. I have googled for hours, but I haven’t found them yet.

    You recommended tradethenews.com, and I wonder whether it offers any API so that the trading can be fully automated. Also, any other alternatives you would recommend?

    • Henry, I think you should contact these companies directly. Bloomberg and Reuters have subscription services, and I have no idea if API is available for tradethenews…
      However, you may not need the numbers to fully automate news trading, there are alternatives that I am currently working on… Will keep you guys posted.

      • Hi, thanks for your quick reply.

        I just contacted tradethenews. Will update you once I get a reply.

        You provide a trigger sheet. Hence, I believe that you must use a source’s forecast numbers as references to calculate the deviations. Would you mind sharing the source?

        Thanks in advance.

        • I verified with someone. tradethenews does provide fixed machine read-able news.

          • Sorry, I took it back.
            I just borrowed an account, and I didn’t see any machine read-able news on tradethenews.com. I will wait for tradethenews’ response.

  18. Thx a lot, Henry. I deeply appreciate your commitment to us novice traders. May God richly reward u.

  19. Riyaz Ahmad Khan says:

    Hi Mr Henry,
    My name is RIYAZ AHMAD KHAN.I am from India.I am trading forex since January 2010.Still a new comer in this and found this field very much lucrative and excited.I am a business man on small scale and doing trading in Indian market since last 8years.Since I start learning about forex,I know you through FPA (Forex Peace Army) and found your analysis about news trade amazing.I Joined your website ans still receiving your mails about news trade. I need to ask something about the exact news online.Can you please suggest me from where I will get the news as soon as it get released during trade.I use internet which is not so fast as I reside in a rural area but it be fast soon InshAllah.Can you please suggest me any website or link etc which provide me the news release on time time so that I can make the successful trades according to your news analysis.I will be thank full to you for this kind act and also thank you for a free analysis,I really appreciate your work.Allah bless you with faith and more wisdom in your field aamin.
    Thanks & Regards
    riyaz

Trackbacks

  1. […] Gross Domestic Product, Retail Sales, Consumer Price Index, Short Term Interest Rate, and so on. . News Trading . repeatedly, and a lot economists will try anticipate the results of these releases, and by […]

  2. […] month, you need to trade just the high-impact ones which are almost certainly to move the market News Trading. Do not ever spend time on ALL news events since they might or might not push the market, and […]

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