The Importance of News for Forex Traders
At a time when information can be an extremely powerful and strategic asset, whether to individuals or businesses, and where information equals money, especially to a trader, cutting yourself off from the news can be suicidal. The Forex market is extremely sensitive to the flow of news related to it, and major short-term currency movements are almost always preceded by changes in fundamental views influenced by the news. Traders around the world make their living by processing and translating information into money. Financial information service providers know how important information is to Forex market participants and charge a premium for it. It is not uncommon to receive hundreds of potentially relevant Forex trading news headlines from any news service provider in an average trading day.
Traders, especially those who trade the Forex market daily, need the latest up-to-the-second updates to facilitate their trading decisions which need to be made at lightning speed. They primarily use online financial news services such as Dow Jones Newswires, Bloomberg and Reuters, which display the latest financial news on their computer screens. Since the speed of information dissemination is very important for traders, many opt for these instant online news services rather than depending on daily newspapers like the Wall Street Journal or the Financial Times which disseminate outdated information of little use to traders. traders.
The main reason why news is so important to Forex trading is that each piece of new information has the potential to alter a trader’s perceptions of the current and/or future situation regarding the outlook for certain currency pairs. When people’s opinions or beliefs are changed, they tend to act on those changed perceptions by buying or selling stocks in the Forex market. Based on the news, these traders will prepare to hedge their existing positions or initiate new positions. A trader’s action is based on the expectation that there will be price follow-through when other traders see and interpret the same news in the same way as him, and adopt the same directional bias as the trader in result.
news is a very important catalyst for short-term price movements due to the expected impact it has on other market participants, and it is somewhat of an anticipated reaction on the part of the trader as it assumes that other traders will be affected. by the news too.
If the news turns out to be bullish, for example for the US dollar, traders who react the fastest will be among the first to buy the US dollar, soon followed by other traders who may react more slowly to the news or wait for certain criteria. techniques to be met before jumping on the bandwagon. And there will be those who join the buying frenzy at a later stage when they get their hands on late news from the morning papers or from their brokers. This gradual entry of the US Dollar bulls over a period of time is what supports the upward movement of the US Dollar against another currency as the US Dollar exchange rate increases against other currencies. The reverse is true for bearish news, traders will sell because they know others will sell soon, thus driving the USD exchange rate down. This is based on the assumption that since other traders will receive the same information, they will also tend to be affected in the same way.
The news that is made public is distributed to the various news wires. Any trader with access to these feeds can tap into the information provided and react accordingly in the Forex market. However, institutional players get information that retail traders don’t, because they have private access to order book information in their computer systems, and can also know something that others don’t through their personal contacts in the industry.
In the world of Forex trading, there are no rules or restrictions against insider trading! Anyone who has information that is only known to a select few can trade that information in the Forex market. Sometimes such information may give an unfair advantage to these institutional players, but at other times this isolated access to information may not translate into real action in the market if other players do not have this information.
Think of it this way: the Forex market depends on news because if there is no news, there would be little to no negligible price movement in the market. Even though currencies can move in technicals at times, the techniques have been established previously by news or expectations of future news, and therefore the influence of news on currency prices is unavoidable and unavoidable.