Trading the global financial markets is one of the most liquid markets ever. And it is very important we understand the fact that it is also the trading of risk. That is why we also need to know the reason we experience some of the volatility we see in the market. There is what is responsible for the movement we experience in the market. There is a philosophical saying “cause and effect”. The fundamentals are what reflect in the effects in the market activities. Therefore fundamentals can be referred to as the causes while the effects can be referred to as technical. We shall briefly highlight how to trade the news by observing these few steps. What is the news? The news is simply information release through any media system that has impact in the market activities at the time. In this context we shall look at tradable instruments like stocks, indices, futures, bonds, forex etc. in the global financial markets.
How do I trade the news? As stated earlier the news is an information release as it affects the economy. What creates volatility in the market is the news. If you want to be successful in trading the news you must follow these steps.
- You must schedule trading time; this time schedule must reflect the time news are being release. Traders are admonished to trade only high impact news as it is usually reflected in the economic calendar. The high impact news always builds up a high volatility which gives the trader more opportunities to make money. Traders should be conscious of the time they schedule to trade. It is not a god idea for traders to chase the noise or fake trends in the market during low liquidity hours. Most movement is generated by big traders who might just want to take advantage the movement. The driving force of such movement is the high impact news which usually would create strong trends either up or down, depending on the direction of the news.
- When trading the news you must ensure you reduce your losses; this very important while trading the news, you do this by reducing the number of trades you execute per time. You must ensure you cut your existing losses, to give room to more trades in the direction of the market. You must also ensure that your equity is strong enough to handle the volatility such news release has created.
- You must take risk management seriously. When trading the news you must ensure you manage your risk effectively to avoid losing your account to the news. It is always a good idea to trade the news when you confirm the direction in which the news is taking the market; you must ensure you use stop order or any other risk management strategy to works for you before the news release. It is a general believe that when the market travels back to the point before the news release, the effect of the news is presumably over.
- Ensure to take advantage of high profits. For every high impacts news the market would likely overreact to the news releases, at this point volatility becomes our friend. If you can quickly follow the right side of the market after the news release you are sure of making good money from such movements.
- Ensure you use less time trading. As a trader, you are not expected to trade all the time, trade only when there is something to drive the market. From research and experience we discovered there are about 35 trade able releases in a month; and about 50% of this are tradable figures; you don’t spend all the time trading rather pick out the tradable hours and take advantage.
Traders are admonished to always make the most of the news when trading. For it is the driving force behind trading which is manifested in the charts. If no news is release the market remain in a consolidation mood.
Featured image from google images