So, why did we start talking about the news all of a sudden? Well, there is one reason for us to talk about it – there is such thing as trading the news.
And no, no. It is NOT when you trade your hot piece of gossip in for something shiny! NO!
Although that’s a shame.
It is when you follow the news and base your trading decisions on it.
And although this type of trading seems fool=proof it seems that there is no such thing when it comes to trading. there is always something, am I right? Well, with trading the news the story is the same.
Let’s just say you heard a major piece of news on TV. And you have made a decision to sell a certain asset because it seems like the business of the country-holder is not all smooth with butterflies. You go. Put down the trade and BAM! Spreads change.
Yes, spreads can change due to the volatility during important events. This of course can really hurt your earnings.
You can also get ‘locked out’ – you can execute the trade at the right time but it may not show up at your trading station for a few minutes. That is pretty bad as you are not going to be able to control your trade as the stats go for the worse.
Also, the price can unexpectedly slip away from you. You may want to enter the trade at a certain price when the price falls down unexpectedly. And of course it is goof if you didn’t manage to enter your trade. But if you already have, bummer…
And yes, all of these can be caused by the news and traders’ actions with it.
As it turns out, trading the news is not all cut and dry as it seems to be in the first place, right?
Well, news still is the biggest force moving the forex market and any market at all for that matter.