When you are a short term trader, there is a great tool to use to boost your daily results called trading the news. This is a perfect strategy if you are looking to enter and exit positions quickly, especially if you are able to time your trades correctly to take advantage of fast movement.
The way it works is pretty simple. When a major announcement is made that concerns an asset, traders and investors react and the price of that asset changes. If you are able to anticipate movement before the bulk of it happens, you can ride the wave of momentum and get off before prices return to where they were before. It’s an easy way to make money, and you don’t need a ton of technical analysis skills to be able to do this. You just need to have a solid handle on how group psychology works, especially in regards to the financial markets.
This happens on a daily basis within the stock market. A company releases information somehow, usually in the form of a press release or conference, depending upon the size of the company. When one of these happens, prices change. The speed and degree of this depends upon the magnitude of the announcement. Sometimes with big companies like Apple, price action happens with just the rumor that an announcement is about to take place. Something specific to stocks is when a company is set to release earnings data. There are usually estimates that exist on where the company should be, and if the earnings number beats that estimate, then prices usually go up. The opposite is also true. When earnings are below target, prices drop. Having a schedule of when these dates are for the companies you follow will help you to time your trading and plan things out ahead of time so that you are never caught off guard or miss out on a money making opportunity.
Within the Forex market, prices move quickly, but they seldom move by a lot unless something major is going on within the world. But because the amounts being traded are usually so high because of leverage, small changes equal big profits or losses. That’s why it is so important to be accurate when you’re trading here. The news also affects currency prices–often in a similar fashion to how stocks are affected. You just need to look in different places. Istead of company press conferences, you need to look at what central banks are doing, what governmental agencies are doing, and lots of internal little things. These include elections, wars, civil unrest, taxes, inflation, and so on. You also need to be prepared to act very quickly. Oftentimes, announcements are made and prices change, only to go back to normal within just a couple minutes. You need to be monitoring things very closely and always know how to react to things the moment you need to. Trading here will give you big profits, and knowing how the news changes prices will give you a big advantage over others.
You can trade stocks and Forex pairs in the binary market, of course, but you definitely need to choose the correct timeframe if you’re going to use this type of trading. It is effective, but a three hour trade might not be appropriate when you should really be looking at 15 minute trades at the most. Again, a knowledge of the markets and your assets of choice in particular will give you the edge that you need here to be successful. Educating yourself is the most important thing that you can do before you begin if you want to be profitable trading the news with forex.
Trading the news is an effective method for creating extra profits, and it can even be a standalone method if you do not have a lot of technical analysis skill and want to day trade. Having that skill will help, but trading the news can allow you to get started in the markets even quicker once you understand how people will react to announcements and news events.