Economic report releases usually evoke volatile movements in the forex market, creating a lot of short-term trading possibilities for breakout traders.
But, not all news reports are tradable. Some of them may not have substantial effect on the market while others do. Thus, prior to deciding on trading the upcoming news, traders may need to find out whether the news is worth trading or not. Traders can discover the importance of the news by browsing at the economic calendar's special features, like, for example, marking all important news in red.
There are typically two methods in forex news trading. The first is by "guarding" the breakout channel. Traders simply put Buy and Sell limit orders on both sides of a price channel, so when the financial news comes out one of the two orders will probably be hit. Though this technique is very simple, it also carries real risks of potentially triggering both orders as the forex market is shaken by the data report. In such "double-hit" situations, forex traders will accept losses on one, or sometimes, even both trades.
The second approach to currency news trading is by essentially analyzing the information. Currency traders can forecast the most probable outcome of the news by looking at such economic calendar fields as: "Forecast" and "Previous". Numbers in those fields could give an idea about the expected data that is to come up.
Then, forex traders would watch the news report and give attention to the actual figures released. If the numbers come as a surprise, meaning that they are far to what was forecasted, then market traders would consider opening a trading position in relation to the situation. If the news carries a favorable surprise, they would open a Buy position. And if it is negative, then they open a Short trade position. This news trading needs more attention from traders, but is also a lot more effective as it comes with lesser risks.
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