News Trading Strategy: Does it Work for You?
Trading based on market expectations before and after a news release is termed a news trading strategy. News trading announcements can require you to make quick decisions because the financial markets might be impacted immediately. That’s why you need to make quick decisions on how to trade the announcements.
When trading on news releases, you must be aware of how financial markets work. Sometimes, we see that news is already factored into the assets price. Especially, news trading strategy is useful for volatile markets, for instance, oil trading.
How to trade the news
- 1 – First, you will have to register the account with a broker. Then you will have access to a demo account straightway to practice with virtual funds before depositing funds and placing live trades.
- 2 – You have to keep yourself up to date with financial markets. The news and technical analysis section is updated daily with articles on the forex, commodity, share, and index markets well written by our market analysts.
- 3 – Having a live account will give you access to Morningstar equity research reports that provide good information for all asset classes.
- 4 – You have to research appropriate trading strategies for your market. Our guide to the most common trading strategies involves both fundamental long-term strategies and short-term price action strategies.
- 5 – Do have a look at combining technical and fundamental practices. These types of
- 6 – The analysis will be more effective when used together.
News trading signals
Some brokers offer automated news trading signals that might help a trader make decisions either to enter, exist or avoid a trade. Furthermore, these hints are based on price fluctuations after a certain type of news release that let traders either buy or sell on assets.
Benefits of news trading strategy
News trading strategy can help because of increased volatility as some specific economic announcements can bring additional volatility in the markets, even if it is just for a short period. Even the finest forex or stock chart patterns can temporarily be thrown out of sync by significant trading announcements such as changes to interest rate or inflation data.
Risks of news trading
There do exist drawbacks of news trading strategy as well. Specifically, news trading requires expert fundamental analysis skills because you need to understand how certain economic announcements can affect your positions and the wider financial market. As there always exists the risk of carrying positions for a longer period. If the news release requires a few weeks to materialize, tour trading positions may be open for several days. That brings overnight risks, so traders should ensure that they have sufficient funds in their accounts to cover these high costs.
Bottom line
A news trading strategy is useful for volatile markets, and there is a common trading motto suggests that it might be better to trade on price action before an announcement rather than waiting for it.
« Why is MACD a Favorite Trading Strategy? What is End-of-Day Trading? »
