The Most Important Pieces of Forex News That Affect Forex Market

Forex news trading has been adopted by very many traders since the inception of the Foreign exchange market. I have been asked by many novice traders which economic news I use in my fundamental news trading strategy. In the article I am going to cover these briefly. I will put them in hierarchical order so anyone could know my priorities.

1. Interest rates decisions made by central banks. This is the data that influences financial markets (particularly forex) most. All economists would tell you that if interest rates rise this has negative consequences for stocks as most companies get their working capital from banks on interest. However, in Forex, rise in interest rates is welcomed by traders as they know that higher interest rates in particular currency present bigger possibilities to make money as traders can make money holding a position in currency which has higher interest against a currency which has smaller interest. For example, if one buys Australian dollar against Japanese yen, he makes money on interest as Australian interest rates are much higher than that of Japan.

2. GDP generally shows general health of country’s economy. Therefore, traders watch the data very carefully to see where a specific country is headed in terms of economy. If GDP starts contracting it could signal other current or potential problems in economy. If it expands, investors view it as a good sign and invest, trade accordingly.

3. Unemployment is the third key element of Forex news that a trader should watch. Problems in job creation signal that economy is cooling or even heading for a possible crisis. When I started trading using news trading method US was especially sensitive to Non Farm Payrolls data and when this piece of news would come out, it would rock Forex pairs immediately. Sometimes pairs would move more than 200 hundred pips in a matter of a few seconds.

There is more news which traders and economists watch: inflation, retail sales, consumer confidence and etc. However, I am not going to expand on the topic as in my experience news which I mentioned in my three points of the article, cause most volatility in Forex.

To conclude with I must say that a trader should always remember that trading news is not only one of the most profitable trading methods, but also the riskiest and without a proper money management rules one can lose all the deposit. When trading news one should apply sound risk management criteria.

If you want to learn more about my trading methods I would advise you to watch my video about Forex news and one more video on forex signals
Good luck in trading.