News trading is possible because the Forex market is always open, unlike many financial markets.
These announcements are usually made after the market has closed for the day. However, because the nature of forex it is opened 24 hours and any economic announcement will have direct affects on the currency of that country and others as well. In the Forex market, there are eight major currencies that are traded, as well as over seventeen derivatives to be traded as well. News can bring increased volatility in the forex market it is important that we trade currencies that are liquid .This means that on any given day, there will always be economic announcements from any of the major traded currencies.
The news with higher impact are from USA. Reason is that the U.S. has the largest economy in the world and the U.S. Dollar is the world’s reserve currency. This means that the U.S. Dollar is a participant in about 90% of all Forex transactions, which makes U.S. news and data important to watch.
Most important volatile news for U.S. are:
- Interest rate changes
- FOMC rate decisions
- Trade Balance
- Inflation indicators such as the consumer price index (CPI), producer price index (PPI)
- Retail Sales
You should take in consolidation these news announcements can have ranging impacts on a country’s currency, and after an announcement, the volatility of a currency may greatly fluctuate. It is important to take advantage of news that creates movements in volatility that will last for a few minutes or even hours. Trading on the Forex market based solely on news is a difficult and sometimes dangerous practice.