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News trading is a practice common among many Forex traders whereby they enter the market just before or following the making of a major economic announcement. In most cases, after such announcements, short-term movements often occur in the market, which can offer opportunities for massive profits or losses within a very short time. 3 Merits The practice of news trading adds at least three merits to your day trading. Importantly, the likelihood that a country's currency would either appreciate or depreciate within minutes of a major financial data announcement enables you to make huge gains from the fluctuations. For instance, if the United States Federal Reserve Bank releases an economic data to indicate that the interest rate has been revised upward, then you are likely to buy the United States dollar with the anticipation that its price will increase such that you will be able to make profits. It has been proven that following the announcement of a key economic report, a country's currency has the potential of either increasing or decreasing in value by nearly sixty to one hundred points within minutes, and you can take advantage of this to make huge gains. Additionally, because the Foreign exchange market runs throughout the day (from 5pm EST on Sunday until 4pm EST Friday) the constant release of financial news and data provides you with the opportunity of integrating news trading into your trader's tool box. Most of the Forex brokers have no less than eight major currencies available and you can choose the one(s) that best suits your trading needs. Thus, there is always a scheduled release of some important economic data to the public and you can harness such opportunities to make significant profits in your trading. Lastly, there are at least seven major economic announcements that are made each day; therefore, trading the news can make your trading much more reliable, less taxing, and, more so, you get compensated faster! 3 Demerits On the other hand, trading the news has at least three disadvantages to your trading. During important economic announcements, there is often extreme volatility in the market and brokerage firms tend to widen their spread, which increases your trading costs, could hurt your bottom line, and, ultimately, could make your trade targets harder to achieve. Subsequently, in trying to trade the major economic announcements, you could also get "locked out" by your Forex brokerage firm. This happens when your have executed a trade at the correct time but the order takes sometime before you can see it in your trading platform. Evidently, this does not give you the ability to make any changes to your order in case the trade goes against you. Imagine if your order fails to show up in your trading platform for a few minutes then, in fear, you enter another trade�c Your risk could be two times as much now! Lastly, trading major economic news makes you to be at a high risk of experiencing slippage. During such events, currency prices tend to move very fast due to extreme volatility in the market; therefore, slippage takes place when the price at which you planned to execute a trade is different from your actual transacted price because your order has been filled at a far different price. It is important to note that slippage is the main problem with placing stop or market entry orders since in most cases they are placed far much away from your actual transacted price; at times too much away from your profit targets or stop loss, which can increase your losses. Conclusion Major economic news is important in the Forex market because it is the fuel that moves it. Thus, proper analysis of the Forex fundamental variables can prove to be of great benefit to your trading. Nevertheless, do not forget to "buy the rumor but sell the fact." Many brokers (along with the one with fixed spread) raise their spreads throughout news releases, which makes it really challenging for a trader to gain profits. If you're a news trader, you should to read the facts of a broker with tight spread even throughout news releases at Dukascopy forex broker. In addition, be sure you use best forex strategy.
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news trading, currency trading, forex,
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