What is the Best Way to Trade Forex on News Releases?

We must first determine whether news items are even worth trading before building a “Trade the News” method.

“Which news releases should I trade？” is a question you want to be able to answer.

Forex traders should become aware with the important event risks that have a significant impact on the major currencies.

Remember, we're trading the news because it has the potential to raise volatility in the short term, thus we'd want to trade only the news that has the most market-moving potential for the currency market.

The news that tends to drive price action and create volatility usually consists of the following:

• Modifications in central bank policy (sometimes known as “monetary policy”).

• Changes in government policy (sometimes known as “fiscal policy”)

• Economic data releases have yielded unexpected results.

• Random tweets from a particular international leader who enjoys emblazoning his name on skyscrapers.

Knowing about forthcoming significant event risks might help you stay on the right side of the market.

Pay close attention to news from the United States.

While most economic news from other countries affects the markets, the largest movers and most closely watched news comes from the United States.

Whether it's in the realms of military affairs, geopolitics, industry, energy, science, culture, or technology, the United States remains the world's most powerful country.

It's even been referred to as a “financial superpower.”

Even if setbacks, imbalances, and weaknesses have weakened its position, the US dollar's dominance and influence will not be matched anytime soon.

The United States continues to have the world's largest economy, and the dollar remains the world's reserve currency.

This means that the US dollar is involved in around 90% of all forex transactions, making US news and statistics crucial to follow.

With that in mind, let's look at some of the most tumultuous news in the United States.

You should also pay attention to geopolitical events, in addition to inflation reports and central bank speeches, such as:

• pandemics,

• Wars

• Natural calamities

• Protests and political upheaval

• Elections coming up soon.

Even if they don't have the same impact as the other stories, they're still worth paying attention to.

When our resident economic nerd, Forex Gump, is in a good mood, he'll usually write an essay on impending news stories that you can play with, complete with trade methods!

Keep an eye on the stock market as well. Especially the stock market in the United States.

There are instances when equities market sentiment is a leading indicator of large currency market movements.

Our next step is to evaluate which currency pairs are worth trading now that we know which news events cause the biggest movement.

How to Pick Currency Pairs for News Trading

You now wish to trade the currency linked with the event's economy after you've identified the event to monitor.

When it comes to “Trading the News,” picking the right currency combination is crucial.

As a news trader, you're attempting to accomplish two goals:

1. Profit from the short-term increase in volatility...

2. While lowering your transaction expenses to a bare minimum

Because news might produce higher volatility (and hence more trading opportunities) in the forex market, it is critical that we trade deeply liquid currencies.

The tightest spreads are seen in currencies with high liquidity, which allows you to keep your transaction costs low.

We can be confident that our orders will be executed smoothly and without “hiccups” when we trade with liquid currency pairings.

• EUR/USD

• GBP/USD

• USD/JPY

• USD/CHF

• USD/CD

• AUD/USD

Have you noticed anything interesting here？

That's correct! All of them are significant currency pairs!

Remember that significant pairings have the tightest spreads since they have the most liquidity.

Because spreads grow when news items are released, it makes logical to start with the pairs with the tightest spreads.

Let's look at some strategies for trading the news now that we know which news events and currency pairs to trade.