When you have a trading strategy and read about high impact news that could potentially affect the market sentiment, what do you do? It could be something related to Non-Farm Payrolls (NFP), Reserve Bank of Australia (RBA) Rate Statement, or Fiscal Stimulus Policy. Some stick to their trading plan, while others immediately change their position to predict the markets.
Which one do you think is more stressful for beginners? Undoubtedly, it’s the latter. For this reason, we recommend that you stop trading temporarily.
Things to understand before engaging to news trading.
During high impact news, sentiments fluctuate drastically, thus making the charts volatile.
One key example is the NFP. Since this is a significant data in the United States that records how many people outside the farming sector are employed in the last month, many investors watch out for this information. It is considered high impact news because the US economy relies on labor to thrive. If NFP data is higher than its forecast, the US Dollar usually skyrockets. If it is lower than forecasted, it plunges.
However, the market’s volatility may confuse most beginners. Thus, it is better to wait for everything to settle and stabilize before proceeding with your plan.
Avoid Analysis Paralysis
Many newbie traders end up making losing trades trying to predict what will happen and trying to ride the wave. While this is doable, it is not advisable for those beginners and conservative traders.
A better way to handle things is to revisit the journal of your trades. You can monitor the entry price, stop loss/take profit, and strategy for each trade in a spreadsheet, regardless of whether it’s a winning or losing position. By doing this, you’ll have the option to backtrack and see what works and what doesn’t. You may also look at the market’s performance during past high impact news to further supplement your analysis. That way, you won’t get stuck trying to make a prediction that most likely won’t come true.
Not Trading is also a Strategy
It is crucial to trade only when there are opportunities that you can take advantage of. One of the mistakes newbies fall for is trying to force the charts to show them those chances that lead to trading excessively and monitoring the markets all day.
This is especially true during high impact news days. Once again, our advice is to simply avoid times when high impact news happens. When the market settles, then you can start to look for opportunities.
But the key takeaway here is to always follow your trading plan. If there is no substantial potential upside for you, don’t trade!
At this point, you already understand why timing is vital. It’s easy to get swayed and bombarded by all the external factors happening in the economy, but it proves worthy to stick to your trading plan.
Here at Learn to Trade, we have our trained experts to guide you with creating a strong plan.
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Information on this page are solely for educational purposes only and is not in any way a recommendation to buy or sell certain assets. You should do your own thorough research before investing in any type of asset. Learn to Trade does not fully guarantee that this information is free from errors or misstatements. It also does not guarantee that the information is completely timely. Investing in the Foreign Exchange Market involves a great deal of risk which may result in the loss of a portion or your full investment. All risks, losses and costs associated with investing, including total loss of principal and emotional distress, are your responsibility