One of the most important aspects of understanding currency pair volatility in Forex is working with the news. Knowing how to work with forex news is equally important for novice and experienced traders who are willing to develop their skills. In order for the trader to prepare the daily strategy for trading, the trader needs to analyze the economic calendar with news for the upcoming trading period.
Successful news trading requires:-
Find out the approximate time expected for the timing of the big news announcement;
– Know the principle of market work when the news is released and recognize how to make a profit on Forex.;
Recognizing the correlation between news and technical analysis. You should also be aware of the fact that some news affect the market more than others.
It’s not difficult to understand.
Trading strategies have been developed over many years, which may indicate a combination of economic factors affecting the way currency pairs fluctuate. Some of these factors are listed below: • the interest rate set by the banks; • Inflation rate; • GDP and industrial production; • business indicators; •
In a given country, the most influential ads by senior officials come from the United States of America, Great Britain, European Union countries, Japan, Switzerland and Canada. Most news in Forex is very predictable: As a general rule, all news is always predictable.
The forex market is expecting this and all its parties are doing their best to be prepared for it.
Experts publish their predictions about possible movements in exchange rates before the news is released. The market can react to the published news in the following ways: •
Basically, if the news is as expected, the price of a given currency will not change. •
If the Forex analysts make the forecast accurately, but without taking into account the consequences of the current market development, the exchange rates will also not change, although the movements of the currency may accelerate. •
In case of an incorrect prediction, the currency will go in the opposite direction.
When analyzing the impact of fundamentals on exchange rates, the overall direction of the market must be considered.
If the published news is against the general trend, this means that the news has a short-term impact: it will only be effective for a few hours.
If the news matches the general trend, the trend picks up speed.
It should be remembered that fundamental analysis fundamentals are most useful when used in conjunction with technical analysis data.
What can affect currency volatility in the forex market?
Expect data releases first, as well as the release itself. This data can be understood as an announcement about the economic indicators of countries where the circulating currency is the local currency, news about interest rate changes, economic releases and important events affecting the foreign exchange market. The period before and after the news event itself can affect the price volatility of the currency. It is sometimes difficult to determine who causes more influence – waiting for the event or its occurrence, but important conditions always manage to cause large fluctuations, or more often they are persistent. The date and time of the next event are predetermined. The economic calendar publishes information about the most important events in a specific country in a specific country. Forecasts about the impact of upcoming events on the exchange rate of a specific currency are published in forecast analysis before the event occurs. By anticipating the event, the exchange rate begins to move in the expected direction, and often after the prediction is confirmed, the exchange rate begins to move in the opposite direction. This happens when traders close open positions during the anticipation period. Second, capital activity (mutual funds, pension plans and insurance), which have the greatest impact on currency fluctuations over the long term. Capital activity includes investments in multiple currencies. The large capital allows these funds to shift the exchange rate in a specific direction. The capital is managed by fund managers.
They have their own ways. Therefore, the position opened by the fund manager can be short, medium and long term. Decisions to open positions are made after analysis (news, technical, etc.) of the market. When opening positions in sync with the correct market direction, managers follow a contingency plan and anticipate the consequences of events, indicators and news. Market analysis can never be 100% accurate, but funds with large capital and proven tactics are able to initiate, correct and sustain the most severe market trends.