When you are trading, it is not enough to know the technical analysis. It is also important to know what factors are driving market volatility.
Behind the trend line, double top, head and shoulders form, there are driving forces for fundamental factors. We call this force news!
In order to understand the importance of news, we can imagine such a scene (of course, this scene is completely fictional).
For example, one of the world’s largest software companies declared bankruptcy, and you are holding the company’s stock.
What do you do first when you hear this news? Do you anticipate a change in this company? What do you think of other people’s attitudes towards changes in this company?
Obviously, your first reaction is to immediately sell the company’s stock. In fact, this is also the behavior that almost everyone will take after hearing this news.
In fact, news influences how we perceive the market and influences our trading decisions. This does not make a big difference when we trade currencies.
However, there is a big difference between the foreign exchange market’s response to news and the stock market’s response to news.
Let us return to the above example again, assuming that you still hear a report of the bankruptcy of a large software company, but the report you heard actually appeared the day before the news was announced.
Naturally, you will sell your stock, and, because you are informed of the news earlier than more people, your losses are smaller than most people.
This sounds great, right? Unfortunately, this trick is called “insider trading”, and it may also cause you to go to jail.
In the stock market, the news is illegal before everyone else, and in the foreign exchange market, this is called a fair game!
The sooner you hear or see the news, the better for your transaction, and you don’t have to worry about being punished by the regulator.
The advancement of instant messaging technology allows you to get the latest and most timely news at your fingertips.
For foreign exchange traders, this is a remarkable thing, because it allows all participants in the foreign exchange market to react quickly in a fair environment.
Large institutional traders, small traders, veteran foreign exchange traders, or newcomers to beginners all rely on the same news to determine market trends, because if there is no news, the market will not show any fluctuations!
News is very important to the foreign exchange market because it is the news that drives the volatility of the foreign exchange market. Except for technical trends, news is like fuel, which drives the foreign exchange market to continue to move forward!
Why trade news
Why should we conduct news transactions? The simple answer is, “For greater gains!”
However, more strictly speaking, as we discussed in the previous lesson, news is a very important part of the market because it has the potential to drive market volatility.
When there are news announcements, especially when important news announcements are made, almost everyone is paying attention to it, and it is a matter of course for the market to experience large fluctuations. As a foreign exchange trader, your goal is to be on the same side as market fluctuations.