One of the most general methods to make cash with Fx day trading is trading forex news. That is, opening short term trades based on forthcoming forex news. Yet, as most currency traders know, this is a very risky trading system and it is easy to get trapped into a losing situation. You could use a good currency trading software like FAP Turbo Robot or the new IvyBot for normal trading. But the forex day trading according to forex news is different. In this article we look at three very important things that you have to consider if you need to gain from day fx tradingforeign exchange trading according to currency trading news.
1. Market Expectations
Failing to take market expectations into account is a regular mistake in news based day trading. We will explain this with an illustration. Imagine there is an forthcoming notice of US trade statistics. According to you this announcement to be beneficial for US dollar, so you open a trade just before the announcement is due.
But you failed to consider the fact that the foreign exchange market in general was expecting this announcement to strengthen the dollar, hence actually, the price movement has been taking place gradually in the days before the announcement. When the report is live, there will be big price movements only if the announcement is considerably different from the forecasts.
This means that your trade will only pay you well if the announcement is much more positive than everybody anticipated. If the announcement figures are good but not as beneficial as expected, the US dollar might fall because the market outlook ahead of the report were exceedingly high. Hence you possibly will in fact lose the trades.
2. Slippage
Slippage is the difference between the price you and actual price that your trade gets filled at. Slippage depends on the forex broker to certain level, but during a news release all can be affected just because the price is highly volatile.
For instance if you are not sure of how a significant fiscal report will go but you are involved in forex day trading and you are expecting a breakout one way or the other, you might put in an order to open a long trade if the price goes up to a specified point, say 1.2000, along with an instruction for a short trade if the price falls.
However, you could be in problem if the price rapidly jumps beyond your trigger. Say it shoots up to 1.2050 . In such a condition you will in all probability notice that your order has been filled at a higher price than you considered, say 1.2030. If the price drops after this, as it regularly does after a run through, the price might stay back at 1.2020. If your order had been filled at 1.2000 that would be fine, but at 1.2030 it is not. Therefore slippage is another issue that can can cause losses in forex day trading if you are not watchful.
You can see a more detailed guide on forex trading here.