Each country has various events happening throughout the year that may impact the currency of that country as well as its performance against competing currencies. These events can either be as a result of the central bank of the country or something planned by the government. This blog aims to point out some aspects of using economic reports as a part of your trading arsenal.
Importance of Economic Events
Economic events are normally scheduled when an economic year is being planned by the Finance sector of a country or its Central Bank is planning its financial year. Some events may be added throughout the year as some sort of mitigation for the currency's growth. Economic events are extremely important as they can drive the currency in a free fall or a hug climb. Checking economic events should always be done before you start your trading day to ascertain what the impact will be for the currency or currencies you wish to trade.
Each economic event will be classified in one of 3 levels;
1. High Impact - These kind of events normally pushes a currency in a defined direction based on the sentiments of the trades. These may involve a change in oil prices for commodity currencies or housing reports within the US market.
2. Medium Impact - Generally have a slight impact on the movement of a currency. You gain a few pips by trading these events.
3. Low impact - These events don't normally have any apparent immediate impact on currency movements, however, should still be monitored for any trade opportunities on lower timeframes.
Trading The News
A lot of traders will use these economic news events and trade and rake in huge profits. On the other hand a lot of traders will choose not trade the news because of the volatility that it can cause. What they will do is close their trades before the event occurs and open new trades after the currency resumes it normal behavior.
If you follow the news closely and trade wisely you can ride huge pip waves and make huge profits on the other hand because of the volatility that the news creates you can also lose big so be careful when trading the news.
How to get the news
there are various ways to get economic news and events even right as they happen. I use WBP Online Terminal to keep up to date the economic events and news as soon as they occur. There's also forex factory where you can get up to date information. Other sources include Bloomberg as well as Market Watch.
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