Forex News Trading and its Pros and Cons

Forex trading based on forex news is a strategy used by traders who view the news publication to present an opportunity for making money. Those contrary to this opinion differ in that they feel after a major forex news publication, it’s not the best time to make any moves.

Typically, forex changes will happen upon a financial, economic, and political news item that prompts a market reaction. In fact, most of the traders who are full-time and not doing it just as a hobby, rely on the forex news as their trading strategy since they are able to spend the bulk of their time on the news. Also, to effectively rely on forex news, you ought to have good knowledge of forex theory and a solid background in macroeconomics.

Making predictions using the Forex news trading relies on two news items; special news indicators and the economic calendar.

Pros of Forex Trading

One main advantage of trading based on the forex news is; news influences the direction the market trend takes. It makes trading real-time. Also, the changes take place briefly after the news item, probably within 30min – 1hr then you can close out your transaction.

Cons of Forex Trading

A major downside of news trading is its mere simplicity of the process. In this case, as a trader, you can make hasty decisions based on your assumption of probable price movement. Relying solely on the news item without the combination of other technical analyses could be misleading.

Conclusion

If you are the trader using the forex news strategy, it is ideal to base your decisions on what is already on the calendar rather than what is not planned. Dealing with what is already planned is a lot easier as it gives a predictable market reaction which raises the chances of success. News that just pop up unplanned are highly volatile, not advisable to make a move based on such news.