What is News Trading or Fundamental trading (Trade the news technique), is a term which we always hear, in this article, I will describe how I see fundamental news trading, and how I trade the news in order to become a successful trader.
I tried forex news trading for many years and discovered great things; how to use economic reports and forex news along with technical analysis.
In this article, I will describe the most accurate and profitable FX techniques, that each trader must use in his trades. First of all, we must use Technical and Fundamental analysis combined in our trades. We can’t rely on one without the other, we must use them both in a smart way.
Technical analysis analyses the history of the currency, and predict the future price. Each trader has a different strategy which he uses in analyzing the market.
Fundamental analysis
In addition, a report may affect a currency during the first 10 minutes or half hour, but before it takes the right trend it can fluctuates up and down, and may stop you out. Many traders set entries above and below the price, before 2 minutes of the release, and wait for the spike. But also it is not worthy method because it may happen that the news which deviate the currency doesn’t have enough momentum to hit the target, or the revision come opposite to the expectations, or the deviation between the actual expectation and the forecasted expectation was not enough to enter a trade, or the report was released and the price was below a certain resistance, which forbid the price to pass it. So you enter a LONG trade but you find that the price went up, afterwards tests the resistance, and suddenly turns back to the support level and stops you out.
Fundamental trading vs Technical trading
I faced a lot of these problems, and you will face it too, if you don’t follow the right technique while trading the news. My technique is very simple and effective:
1 – Don’t trade all news trading reports, trade only those who create, and define the direction of the trend (Interest rates, trade balance, and NonFarm Payroll). Do not trade these news trading reports only because they are important, it may happen that a report come better then expected but it will not trigger a momentum.
I enter a trade only if the actual data come much better or worse as expected (good deviation) and the revised data, come along with the actual data, and there is no important conflicting report.
2 – The other normal news trading reports are also important. They are used to confirm or to close a trade, especially when we are in the beginning of a specific trade. If you have just entered a trade, and your current profit is between -20 and 20 pips, and a specific report is released, and that report affects the currency you are trading, then we close it because this report has a good probability to stop you out.
When you gain a good number of pips, then you may not rely on normal economic reports, and rely only on technical analysis and continue your trade until you hit your target.
Conclusion
Fundamental and news trading is a good technique, but we must use it along with technical analysis, and we must take in consideration trading the important fundamental news reports, the deviation between actual and Consensus, the revised data, the conflicting news trading reports and the support and resistance levels.