The world of Forex relies more heavily on the news than most people might realize; in fact, some trades are made based on allegations within the news, rather than actual events, and this should demonstrate how much of an effect it can have on this industry. Believe it or not, economies have collapsed because of scares that were produces by the media alone, and while this isn’t likely to happen again anytime soon, this doesn’t mean that the news can’t affect the Forex market at all. What type of news affects this market drastically enough for people to take notice and are there times when rumors could end up affecting the market more than actual events?
Economic News
Contents
One of the most obvious news pieces that will affect the Forex market is the one relating to economics. As the contributors of Investopedia explain;
Economic data tends to be one of the most important catalysts for short-term movements in any market, but this is particularly true in the currency market, which responds not only to U.S. economic news, but also to news from around the world.
People who are involved in this industry automatically pay attention to news relating to the economy because it directly affects the currency within a particular country, but what many don’t realize is that when one currency is affected, others are too. The economic fluctuations of one country will cause ripples in others, just like the economic collapse recently affected just about every country throughout the globe.
Understanding how countries trade with each other, and how economies are influenced by each other can actually help a trader predict what is going to happen with certain pairs; you might be surprised at just how many countries are closely interlinked when it comes to economics.
Subcategories Of Economic News
Under the economic news category falls many different subcategories, including the sales of retail stores, decisions concerning interest rates and even rates of unemployment. These news pieces, among many others, tend to impact countries differently, and they don’t always have long term effects. In some instances, news pieces relating to these subjects could end up producing short spikes or downtrends with regards to certain currencies, but more often than not, they settle out again in the long run.
When news becomes public, whether it revolves around the sale of a large corporation or even a rising unemployment rate, people need to move quickly if they want to take advantage of these trends.
Mario Sant Singh advises;
You should be able to do this quickly as well because the market immediately reacts to these economic indicators.
The faster someone is able to react, the more chance they will have of making a worthwhile amount of money in this field. Basically, this means that it is not just the news that affects the market, but how people react to it.
Reacting To Reactions
There are times when the news affects the Forex market in a different way, and this is when news is reported of a certain trend. When this happens, people might end up jumping onto the bandwagon so that they don’t miss out, and this can cause a slight trend to become quite a strong one, influencing the market even more.
Since just about anyone can sign up for a Forex account, this means that there are many beginners out there who might be following trends to improve their chances of success within this industry, and so they might not be aware of how their trades impact the industry. An experienced trader could end up using information like this in their strategies, particularly if they feel that a strong trend is about to influence the market.
Natural Disasters
Natural disasters can have a very big impact on the Forex market, particularly if it is something of a large scale magnitude. People might be hesitant to trade on these types of events because of the harm that they cause within a country, but because of the economic difficulties that are faced following major disasters, traders should take care not to ignore them; after all, this industry is about numbers, not emotions.
As the experts of UFX Markets explain;
…natural or man-made disasters can slow production, influencing stock and commodity prices.
It is worth noting that Forex markets and the media operate on a 24/7 basis; this means that traders should always be on the lookout for news that might affect their trades, either negatively or positively. Remember, the markets adjust almost by the minute once the news of a major event has been released, so if you don’t move fast enough, you could be in for a lot of trouble.
Focusing On The Larger Economies
Because there is so much information out there that could end up affecting the markets, people need to focus on the larger economies because these will have the biggest impacts on the rest of the currencies throughout the world. These larger markets include; Germany, Japan and the United States.
It is always a good idea to improve your general knowledge of the major economies, as well as get to know where their strengths and weaknesses lie; sometimes the former could be the basis of the latter.
It can be difficult to decide which data you will need to focus on when you begin trading because there are so many different factors that could end up affecting the rise and fall of a currency. Traders need to have an overall knowledge of the field that they are interested in, and keeping an ear to the ground with regards to world news is imperative, since just about anything could end up sending their currencies skyrocketing or plummeting. Instinct plays a big role in successful trades, but this is honed from years of research and strategy planning; make sure that you enter into this field with a view that it is based on sound planning, instead of gambling and you’ll greatly reduce your risk of failure.
Our Rating: [yasr_overall_rating]