I am actively participating in ForexFactory. A lot of traders are trying to predict and trade the news released. Of course,
- there are winners and losers.
- interpretation of a news release is often subjective.
- Those traders who have opened trades on hand are worry about the news released and trying to post their opinions that bias to their positions.
Here I am trying to share how I deal with news releases.
Many times unexpected news may come out that is the opposite of what the market has been doing. Initially, the response is a rapid, hard move the other way, but once traders take a deep breath and reevaluate, the market normally will continue in its set trend. I can’t count how many times an above expectation news release, has a quick bounce, and the spirals back downward. The news isn’t important here; it is more important to see how market reacts to it after the initial move. Fundamentals should be believed only as long as the technical signals agree. Too many times a trader will stick with a news story and not let go no matter what the market ends up doing. Opinions mean nothing to the market; the market goes where it wants to, not where you think it should go. If the market shakes off news and continues its trend, a trader should ignore the news and follow the market.
In my opinion, the most important thing a trader should do before a scheduled news release is to be flat. The market can go either way when a report comes out, and by having a position you are adding too much risk to your trading. It’s not worth trying to guess which may be the market will go after a report comes out. When a traders starts doing this, he becomes a gambler, not a trader.
When it comes to being objective about a fundamental idea remember to not think with your position. Two people can hear the same news and look at it completely differently because of their positions. The market will tell you where it should go, and your opinion doesn’t mean anything to the market. By focusing on the market and not on the fundamentals, one can be more objective and have a better grasp of what is going on.
Lastly, this is my 2 cents.