This article looks at the different advantages and disadvantages of trading a forex news strategy.
When entering the foreign exchange market, you will notice that there are numerous forex trading strategies available to you. To be a successful trader you must ensure that the strategy you choose is suited to your trading style and personality type. It is essential that you have a strong knowledge of the strategy that you are using. This is important so that you are able to adjust and amend it when trading.
Many traders will use the forex news fundamental trading strategy. This technique can lead to profitable trades; however it does require experience and knowledge of the market. While new traders can attempt trading on forex news, it is not a recommended option.
The benefits of trading on forex news
One major benefit of trading on forex news is the simplicity and user-friendliness. The forex news strategy is based on the principle that movements in the foreign exchange market are influenced by changes in foreign currency values, and these changes in values are affected by relevant news releases. The primary events to have an impact on market movements are the social, economic and political happenings of a country. This being the case, you should be able to predict a currency movement by keeping up to date with forex news releases.
It is vital that you have experience in the forex market as the risks to this strategy are generally quite high; however, the rewards are great and often outweigh these risks. By remaining alert and focused, you will have the ability to buy currencies before other traders enter the market.
A final advantage to the forex news strategy is the accessibility of news releases. The news releases are available to the public online via all forex, social media and news websites. You are also able to receive notifications of news updates via social media apps as soon as they are released.
The drawbacks of trading forex news
The primary disadvantage of trading forex news is that it can be very time-consuming. There are vast amounts of news items released per day, and not all of them are relevant to your currency pairs. In order to be effective when trading you must focus on the news that impacts your chosen currencies and this requires a sorting through the released items.
The majority of new traders do not have the time to sift through these announcements as there are numerous other trading issues to be managed. If you opt for a forex news trading method, you must be prepared for these factors. However, experience will make the process simpler as time passes.
A final drawback, that affects new traders more than others, is the time of the release. The releases are presented to large corporations and professional traders before they reach the general public, and it is important you obtain the most important items before other traders. This provides you with an advantage over others which can lead to effective trading.