2 Ways to Trade the News
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Thread: 2 Ways to Trade the News

  1. #1
    Join Date
    Aug 2014

    Default 2 Ways to Trade the News

    There are two main ways to trade the news:

    a) Having a directional bias

    b) Having a non-directional bias

    Directional Bias

    Having directional bias means that you expect the market to move a certain direction once the news report is released. When looking for a trade opportunity in a certain direction, it is good to know what it is about news reports that will cause the market to move.

    Consensus vs. Actual Number

    Several days or even weeks before a news report comes out, there are analysts that will come up with some kind of forecast on what numbers will be released. As we talked about in a previous lesson, this number will be different among various analysts, but in general there will be a common number that a majority of them agree on. This number is called a consensus.

    When a news report is released, the number that is given is called the actual number.

    ďBuy the rumors, sell on the news.Ē

    This is a common phrase used in the forex market because often times it seems that when a news report is released, the movement doesnít match what the report would lead you to believe.

    For example, letís say that the U.S. unemployment rate is expected to increase. Imagine that last month the unemployment rate was at 8.8% and the consensus for this upcoming report is 9.0%.

    With a consensus at 9.0%, it means that all the big market players are anticipating a weaker U.S. economy, and as a result, a weaker dollar.

    So with this anticipation, big market players arenít going to wait until the report is actually released to start acting on taking a position. They will go ahead and start selling off their dollars for other currencies before the actual number is released.

    Now letís say that the actual unemployment rate is released and as expected, it reports 9.0%.

    As a retail trader, you see this and think ďOkay, this is bad news for the U.S. Itís time to short the dollar!Ē

    However, when you go to your trading platform to start selling the dollar, you see that the markets arenít exactly moving in the direction you thought it would. Itís actually moving up! What the heck! Whyyyyyy??

    This is because the big players have already adjusted their positions way before the news report even came out and may now be taking profits after the run up to the news event.

    Now letís revisit this example, but this time, imagine that the actual report released an unemployment rate of 8.0%. The market players thought the unemployment rate would rise to 9.0% because of the consensus, but instead the report showed that the rate actually decreased, showing strength for the dollar.

    What you would see on your charts would be a huge dollar rally across the board because the big market players didnít expect this to happen. Now that the report is released and it says something totally different from what they had anticipated, they are all trying to adjust their positions as fast as possible.

    This would also happen if the actual report released an unemployment rate of 10.0%. The only difference would be that instead of the dollar rallying, it would drop like a rock!

    Since the market consensus was 9.0% but the actual report showed a bigger 10.0% unemployment rate, the big players would sell off more of their dollars because the U.S. looks a lot weaker now than when the forecasts were first released.

    Itís important to keep track of the market consensus and the actual numbers, you can better gauge which news reports will actually cause the market to move and in what direction.

    Non-directional Bias

    A more common news trading strategy is the non-directional bias approach. This method disregards a directional bias and simply plays on the fact that a big news report will create a big move. It doesnít matter which way the forex market moves. We just want to be there when it does!

    What this means is that once the market moves in either direction, you have a plan in place to enter that trade. You donít have any bias as to whether price will go up or down, hence the name non-directional bias.

  2. #2


    Yeas you have mentioned these pre determination in the minds of a trader very well, these factors are well thought off by the traders and the decision is based on this.

  3. #3
    Junior Member
    Join Date
    Feb 2015


    Really great effort. Basically, trade on only technical logic of the market. But, i get clear idea for news trading. Thanks again. By the way, I think news trading is very risky for new Forex trader.

  4. #4
    Junior Member
    Join Date
    Jul 2014


    Currencies rise and fall on speculation and that speculation usually starts with the news. The key here is the fact that market price will change greatly, and it is important to keep an eye on current events. The ECN is particularly ideal for event or news trading where markets can get extremely volatile. current account with tickmill ecn has fast execution, and low cost transaction suitable for news trading activity since This is vital for event and news trading, where success can depend on you being able to create specific entry and exit points at the price we want.

  5. #5


    the best way is trade after report. when market has new we will have more time for analysis it. we will get better signal. market can be moving fast at that time but we need control our entry we will get better chance with it.

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2 Ways to Trade the News