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News Straddling Trading Strategy (Part I)

The forex market is extremely sensitive to the flow of news related to it. Major short tern currency moves are almost always preceded by changes in fundamental views influenced by the news. Traders around the world make a living by processing and translating information into money.Get these forex training secrets.

We live in an era where information can be extremely powerful and strategic asset. Timely information is vital to an individual or a corporation and information equals money especially to a trader. Shutting yourself off to the news can be suicidal.Understand these forex broker games.

Traders especially the day traders require the latest up to the second news updates so as to facilitate their trading decisions which have to be made at the lightening speed. The speed of the news dissemination is very important to traders.

Online news services display the latest financial and economic news on their computer monitors. Many opt for instant online news services such as the Dow Jones Newswires, Bloomberg and Reuters.

News is important to forex trading because each new piece of information can potentially alter the trader’s perception of the current or future situation relating to the outlook of certain currency pairs.

News that is of great importance to forex traders is generally related to a country’s economic, monetary and political situations and socio-political events that are happening around the world like in Middle East and North Korea.

Based on this news, these traders will be preparing to cover their existing positions or initiate new positions. A trader’s action is based on the expectation that there will be follow through in prices when other traders see and interpret the same news in a similar fashion and adopt the same directional bias as the trader as a result.

This is in a way an anticipatory reaction on the part of the trader as he or she assumes that the other traders will be affected by the news as well. Because of the expected impact it has on other market players, news is a very important catalyst of short term price movements.

Suppose the news happens to be bullish for the USD. Traders who reacts the fastest will be the first to buy US Dollar. They will be followed soon by other traders. Other traders may be slower. They maybe were waiting for some technical criteria to be met before they jump on the bandwagon.

There will be many who will join in the frenzy at a later stage when they get hold of the delayed news in the morning newspapers or from their brokers. This progressive entry of the USD bulls over time is what sustains the upward move of USD against another currency.

The reverse will happen on the surprise bearish USD news. Instantly traders will start selling USD on the assumption that when other traders will hear the news, they will also start selling.