SO HOW EXACTLY DOES Forex News Trading Work

The Forex market is quickly becoming the most popular investment vehicles due to its huge volume and liquidity. However, it is also probably the most volatile investment vehicles because of its sudden price fluctuations and the fact that almost all of the market is heavily leveraged. Therefore, fortunes could be made or lost in short order making the need for a trusted investment system very urgent indeed. While many Forex investors trust charts that track price movements along with other forms of technical analysis to greatly help determine entry and exit points, there are several investors who like enter and exit positions based on news releases.

In theory, the smaller Forex retail traders must have a slight advantage in terms of capitalizing on how the news affects the markets. With immediate Internet access and a never ending blast of brokers ready to execute trades at any hour of the day, small investors will be able to buy or sell a posture quicker than some large conglomerate, mutual fund, or hedge fund. The market can literally adjust in minutes to relevant news releases so investors who move quickest should be able to capitalize--in theory.

Of course, it does boil right down to knowing what news is pertinent and then to determine how that may affect the currency exchange rates. Even news from countries other than those in your currency pair can play a substantial role in short term price corrections. For those desperate to trade in the Forex based on news releases, there are 8 major currencies currently playing significant roles in the market, including:

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1. U.S. Dollar(USD)

2. Euro(EUR)

3. British Pound(GBP)

4. Japanese Yen(JPY)

5. Canadian Dollar (CAN)

6. Australian Dollar(AUD)

7. Swiss Franc(CHF)

8. New Zealand Dollar(NZD)

Because the USD is a backer in nearly 90% of most transactions on the Forex, the release of key economic indicators from the U.S. are always important to the forex rates. These data are released at regular intervals which supposedly levels the playing field between the large and small investors. Theoretically, they should be in a position to capitalize upon short term price fluctuations due to the release of these key indicators:

1. Interest Rate Decisions by Central Banks/Financial Policy Makers

2. GDP rates

3. festival of trade

4. Unemployment data

5. Inflation

6. Retail sales/manufacturing output

7. Business Confidence as dependant on Outlook Surveys

8. Consumer Confidence Surveys

9. Manufacturing Confidence as dependant on Outlook surveys

Trading on the Forex based on news releases means capitalizing upon short term fluctuations in the market as it corrects itself. Because these corrections can happen in a matter of minutes, it is vital for this type of investor to capitalize quickly or risk jumping following the market has already adjusted for the brand new information. While this is theoretically possible, it is extremely possible that the big investors had usage of the information ahead of its release. If these investors have already shifted their investments accordingly, then the market will have already corrected for the news headlines before it had been released--at least partially. If that is the case, then the small investor will jump in too late and likely face a loss.

Indeed, trading upon news releases is quite dangerous since it also encourages over trading--a factor known to lead to losses--especially on the Forex. That is why most Forex investors trust technical analysis and their trusty charts when making decisions about entry and exit points available!