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Why follow the news when trading

Why follow the news when trading

There is no consensus in trading on the importance of news influence on trade. On the one hand, the possession of information in any business is beneficial, and in principle can not be superfluous. On the other hand, excessive media trust results in emotional behavior and, ultimately, a built-in trading system. However, most traders tend to consider the news in their work.

 

TYPES OF RELEVANT NEWS

 

The information field in the modern world is immense. It is impossible to predict exactly what data and whose words can affect financial markets. And to keep track of everything is also not real. However, we can identify the main types of important news for trading:

  • Political. They deal with elections, changes in laws, the imposition of sanctions, which has become especially relevant in recent years.
  • Economic. These include the actions of central banks and everything related to the budgets of countries, inflation, government debts, gold and foreign exchange reserves.
  • Stock. First of all, they are connected with stock indices, as well as the issue of bonds, auctions.
  • Corporate. This is all about the activities of individual companies, such as dividend policy, launching new projects, changing lines of business or management. And the most interesting for traders and investors reports on the activity for temporary periods - the year, the half-year, the quarter.
  • Social. Related to wages, unemployment, social benefits.
  • Related to natural phenomena. Financial markets are most often affected by information about cataclysms that can disrupt the functioning of the economy.

 

News can also be divided by the principle of waiting for events into predicted and unpredictable.

 

Predicted news is most often released in the designated day and hour. It can be press conferences, briefings, reporting, presentation of projects. Their theme is usually known in advance. Therefore, many traders prepare strategies of their own behavior in advance, depending on what data will be announced there. To simplify the process, brokers often publish announcements on their websites in the "Economic Calendar" section. There you can also find forecasts on individual items.

 

Unpredictable news can appear at any time. And it is almost impossible to prepare for their occurrence. Usually have a negative character: floods, hurricanes, technological accidents. Assessing the effects at the initial stage is often extremely difficult.

 

HOW TO USE NEWS IN TRADE

 

There are two tactics relatively important for trading news. Supporters are the first to try to stop trading on the eve of their release. For this purpose, orders are not opened when an important event is listed in the economic calendar. Or the tools used are adjusted. For example, if a report is planned in Japan, the trader does not trade currency pairs with the yen, but chooses others. If the order stays open longer than expected, and the time of publication of the news is suitable, it is sometimes even closed at a loss for fear of further losses.

 

Proponents of the opposite tactic try to predict the behavior of financial markets after the release of significant news. If the appearance of information leads to increased volatility, then it is possible to earn money. This trading is more suitable for experienced traders.

 

09.12.2020
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