Trading on News brings better results in the Financial Market: Trading on news can be a powerful strategy in the financial market, especially for binary options traders. Therefore, the ability to quickly react to market changes caused by economic announcements can result in great profit opportunities. Additionally, in this post, we will explore how to trade on news, the different types of economic events, and how to use this information to optimize your operations.
What Do Bulls Mean in Economic News?
Economic news is often rated with a “bull” system to indicate the importance and expected impact of the news on the market:
1 Taurus: Therefore, low impact expected. News that generally does not cause large price movements. 2 Bulls: Also, medium impact expected. News that could cause moderate price movements. 3 Bulls: High impact expected. News that often causes large price movements and high volatility.
Types of Important Economic Events
Interest Rate Decisions
FOMC (Federal Open Market Committee)
Interest rate announcements by the FOMC are highly impactful (3 bulls). For example, if the FOMC decides to raise interest rates, this could strengthen the USD, causing pairs like USD/JPY to rise.
Employment Reports
Payroll:
The US jobs report, known as Payroll, is a 3-bull event. Therefore, if Payroll data is better than expected, the USD could strengthen, resulting in significant movements in currency pairs involving the dollar.
Gross Domestic Product (GDP):
The GDP release is another 3-bull event. Additionally, a strong GDP generally indicates a healthy economy, strengthening the local currency. If US GDP is released above expectations, for example, the USD could appreciate.
How to Trade in News
Prior Preparation
Before any important news is announced:
- Check Analyst Forecasts: Knowing what analysts expect can give you an edge.
- Choose Your Currency Pair: If you expect news to affect the USD, for example, choose pairs like EUR/USD or USD/JPY.
Operation Strategies
Interest Rate Decisions
Example: The FOMC is scheduled to announce an interest rate decision at 2:00 p.m.
Before Announcement:
- If the expectation is for a rate increase, consider buying USD/JPY. If it is a reduction, consider selling USD/JPY.
After Announcement:
- Use a 5-minute chart to see the initial market reaction.
- If the market reaction confirms expectations, maintain your position. If not, reevaluate and adjust your operation.
Employment Reports
Example: The US jobs report (Payroll) will be released at 08:30.
Before Disclosure:
- If the forecast is for fewer jobs than expected, consider buying EUR/USD (USD weakness expected).
After Disclosure:
- Use a 1-minute chart to see the market’s immediate reaction.
- If the data is worse than expected, maintain your long position. If they are better, consider selling EUR/USD.
Gross Domestic Product (GDP)
Example: The release of the US GDP is scheduled for 08:30.
Before Disclosure:
- Check economists’ GDP forecasts.
- If the expectation is for a strong GDP, consider selling GBP/USD (USD strengthening).
After Disclosure:
- Use 15-minute charts to see the trend after the release.
- If GDP is higher than expected, maintain your short position. If not, reevaluate and adjust your position.
Best Times to Trade in News
The best times to trade are during market openings and closings, when volatility tends to be greater. These periods include:
- New York opening: 09:00 – 10:00
- New York Closing: 4:00 pm – 5:00 pm
- London opening: 04:00 – 05:00
- London Closing: 11:00 – 12:00
- Overlap London and New York: 09:00 – 12:00
- Tokyo and London overlap: 04:00 – 06:00
- Sydney and Tokyo overlap: 20:00 – 03:00
Classification of the Best Times to Trade in News
Classification of the best times to trade in news in descending order of propitious:
- London and New York overlap: 09:00 – 12:00 (30%)
- New York opening: 09:00 – 10:00 (20%)
- New York Closing: 4:00 pm – 5:00 pm (15%)
- London opening: 04:00 – 05:00 (15%)
- London Closing: 11:00 – 12:00 (10%)
- Tokyo and London overlap: 04:00 – 06:00 (5%)
- Sydney and Tokyo overlap: 20:00 – 03:00 (5%)
Practical Examples
How to operate this News… Positive to the USD
Assessment of the Impact of the News on the Dollar
The job creation news (Payroll) was positive, showing 213K new jobs against a projection of 200K.
Operation on Metatrader
Preparation:
- Before the news, analyze the currency pairs involving the USD, such as EUR/USD, USD/JPY, GBP/USD.
- Determine support and resistance points on the charts.
Check-in Time:
- The news was released at 9:30 am (Brasília time).
Entry Candle:
- Using a 5-minute chart on Metatrader, observe the market’s immediate reaction after the release at 09:30.
- If the 09:30-09:35 candle shows significant upward movement in the USD (e.g. falling EUR/USD), enter a sell position on EUR/USD at the start of the next candle (09:35).
Risk Management:
- Set a stop loss above the nearest resistance level to limit potential losses. Therefore, you will protect your capital against adverse movements.
- Set a profit target based on the following support to ensure a positive return. This way, you maximize your earnings in a controlled manner.SummaryBased on the data released, the positive news for the US job market suggests a strengthening of the dollar. Therefore, the recommended operation would be to enter a sell position on EUR/USD immediately after confirmation of the upward movement in the USD on the 5-minute chart, specifically at 09:35, using the candle that forms after the news is released at 09:30. This way, you take advantage of the initial movement driven by the news.
What if with this news the candle did not fall on the EUR/USD?
If, after the news is released, the candle does not indicate a fall in the EUR/USD (that is, if there is no significant upward movement in the USD), it would not be prudent to carry out the operation based on this news. Here are the steps for this situation:
Assessment and Decision Not to Operate
Candle Note:
- After the announcement at 9:30 am (Brasília time), observe the market behavior in the first few minutes.
- If the 09:30-09:35 candle does not show a significant drop in EUR/USD, it means that the market did not react as expected to the news.
Reevaluate
other factors that may be influencing the market, such as other economic indicators, political events or central bank interventions. This way, you will have a more complete view of the context.
Consider
the possibility that the market has already priced in the news or that other factors are offsetting the expected positive impact. Therefore, it is important to understand all the variables involved.
Decision Not to Operate:
If the expected movement does not occur
, refrain from carrying out the operation. Forcing an entry without movement confirmation can lead to unnecessary losses. So be patient and wait for clear signals.
Wait for other opportunities
market where signals and movements are more aligned with your analysis. This way, you guarantee safer operations with greater chances of success.
Contingency Strategy
Continuous Monitoring:Follow-up:Continue monitoring the market to see if the expected movement occurs later.However,the market may take some time to digest the news.Therefore,Staying alert is crucial.Other News:Keep an eye out for other economic news that may be released later in the day and that could influence market movements.That way,you will be able to adjust your strategies as needed.Preparation for Other Opportunities:
Technical and Fundamental Analysis:Continue using technical and fundamental analysis to identify other trading opportunities.Furthermore,remember that the market offers several opportunities and that patience is a crucial virtue for any trader. Therefore, do not rush to make impulsive decisions.
Summary: If the news does not result in the expected movement in EUR/USD, it is prudent not to carry out the operation. Reevaluate the situation and stay prepared for other opportunities, ensuring that your trading decisions are always based on clear market data and confirmations. Therefore, remaining calm and following a structured approach is essential for long-term success.
Conclusion
Trading on news can be a highly effective strategy if executed correctly. Being well informed about economic events and understanding how they impact the market is crucial to making informed trading decisions. Additionally, choosing the best times to trade can significantly increase your chances of success.
Call to Action
For more information and investment strategies, visit our Traders Business Plan website.
FAQ
What are bulls in economic news?
Bulls indicate the importance and expected impact of the news on the market, with 1 bull being low impact, 2 bulls being medium impact and 3 bulls being high impact. Therefore, it is essential to understand this classification to make informed decisions.
What are the best times to trade in news?
The best times are during market openings and closings, when volatility tends to be greater. Additionally, these time windows offer significant opportunities due to increased trading activity.
How to choose the right currency pairs to trade on news?
Choose currency pairs that are directly affected by economic news. For example, if the news is about USD, choose pairs like EUR/USD or USD/JPY. Therefore, analyzing the relevance of news for certain pairs is crucial for effective trading.
Reference Site: Investing.com –
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