Forex trading is an immense sector but oftentimes, we do not seem to acknowledge its full scale. Yet, regardless of the scale, what makes this sector so significant is its interconnected nature. Today, Forex training is practically completely based on the internet. People from all around the world are connected through the World Wide Web.
Therefore, this sector is truly global. Millions of people all around the world trade on a daily basis and read the news about drastically changing exchange rates and financial trends. After all, everyone wants to be remembered for making impossible currency trades a reality. The news is what truly sparks a lot of action within this incredible world of forex trading. As soon as certain news comes out, countless people perform various actions on the market, shifting the market based on what has been reported.
This is the real and true power of publishing like Bloomberg and others. They attract unprecedented attention and even a teeny-tiny article can impact various markets and exchanges in different parts of the world. Therefore, news trading is a rather influential tool that is used by many people globally. Within this article, we will explore how news trading in Forex can work for anyone and what it really does.
Currencies that will surely be profitable
First and foremost, let’s talk about currencies and pairs that should bring in the profit for you. At the end of the day, that green buck is the most important factor in this sector. Unsurprisingly, not every currency and asset is good for such operations. It is the contrary as only the strongest and most popular currencies can be sold easily on global markets. That is why the experts, back in the day, came up with the term “liquidity”. If your asset, in this case, a certain currency is not liquid enough, the trade you are trying to perform will simply not go through or get delayed. This might make u lose a once in a lifetime opportunity for a notable profit.
But what is liquidity? The term sounds quite confusing and at a glance irrelevant. However, the truth is that it has a very simple, yet profound meaning. In simple terms, liquidity describes the currency (or another type of asset) that will surely be bought elsewhere by someone. There should practically always be someone willing to purchase what you have to offer and at the price that you have chosen. Should there be no such person willing to buy your asset, then you do not have any liquidity.
Now, there are many currencies on the market. Today, amidst the digital developments within the financial industry, even cryptocurrencies are traded in forex. After the success of Bitcoin, thousands of digital currencies were created by various groups of entrepreneurs. As a result, these innovative currencies are now traded by countless brokerage firms and traders listed on https://forexbrokerslist.org/ as the best in their sector. However, not every currency, innovative or traditional, newer or older is good for trading. There is the liquidity shortlist that includes the currencies that are traded the most globally, therefore are rather liquid. The currencies are the following:
- United States Dollar USD
- Euro EUR
- Japanese Yen JPY
- Pound Sterling (United Kingdom) GBP
- Australian Dollar AUD
- Canadian Dollar CAD
- Swiss Franc CHF
- Chinese Renminbi CNY
This long list continues with the New Zealand Dollars to Swedish Kronas and other currencies, leading down towards the least liquid ones that you would certainly not want to trade. These, listed above, are the most liquid currencies on earth, meaning that any pair out of the eight would go through in a matter of seconds. This ensures safety and convenience for those who value time and effort.
Nevertheless, always remember that the market is practically a living organism. It reacts to events unfolding around it and changes drastically according to them. Therefore, the liquid currency might suddenly end up being completely untradable. Events like natural catastrophes, financial crises and healthcare emergencies, like the 2020 novel coronavirus pandemic impacting economies globally, might turn things upside down.
When should I trade?
There is naturally no universal answer to this question. You should trade whenever it is the best time for a particular currency pair. When the GBP is falling due to Brexit, EUR might be thriving due to other economic, political, or social reasons. Therefore, make sure to thoroughly research the circumstances and choose the best possible time to trade with the pair.
One thing you should certainly keep in mind is that the vast majority of news is published during the early morning hours. For instance, Bloomberg’s offices prepare the news the previous evening, then release them on the most profitable markets during early morning hours. However, currency pairs and their native countries are not always within close geographic proximity from each other. That should not be an issue! With smart enough planning one can coordinate timing well.
For instance, if you are trading USD and EUR, make sure to consider the East Coast Time in the US and the Central European Time (CET/CEST) in Europe. This is because the headquarters of the European Central Bank is located in Germany, which uses the latter time zone. In the case of GBP and therefore London, one would use the Greenwich timezone which is conveniently located between the EU and the United States.
Just make sure to use these simple tips when streamlining your news trading strategy and take them into account. It should be just fine as far as you follow the universally recognized guidelines and well, time zones.
Are all news significant? What are the important news that should be taken into account
In general, as mentioned above, markets are extremely vulnerable to sudden events and global crisis situations. Therefore, small news can have a significant impact on the development of the market. However, there still are some categories of news that have a much bigger influence over the market than, for instance, the news about the latest fashion trends in a particular country.
Unsurprisingly, the most important news for traders is linked to finance and economics. Unemployment rates, inflation, economic growth forecasts and their change, interest rates and their adjustments all have a big impact on this industry. However, a sudden global event, such as the COVID-19 pandemic can also play a defining role in markets throughout the world.