When news of the trade have three questions to ask yourself before every transaction: or important news? Or & # 39 is a surprise big enough? And surprisingly fits the mood of the market?
1. The big news?
The first task – to find out what is important and what is not necessary. The first three parts of potentially market-based economic data for any country, representing the employment report, retail sales, as well as data on manufacturing and the service sector, also known as ISM and PMI reports. In addition to these issues of gross domestic product (GDP) and inflation messages (consumer and producer prices) are also listed. You can not trade in such reports as the "Beige Book", because specific figures for comparison No data are published on a weekly basis, and any economic reports in Japan and Switzerland are almost always zaslanyayutstsa general sentiment in the market.
If you are having a difficult time figuring out whether it is possible to trade data or not, the majority of Forex sites lists the impact that can have every piece of data on the currency. We want to trade.
2. a & # 39 is a surprise big enough?
The second issue with the & # 39 is the most cunning of the three, because it is subject to interpretation, but it is good that the market usually make interpretation for you. As a rule, if the figure is greater than or less than the forecast by more than 5 percent, it is considered to be a big surprise, but sometimes a surprise 2 percent is enough to cause a greater reaction in the currency.
So what do you do? Just wait and see how the market reacts to the release. If the currency pair barely moved aside, it is likely to surprise is not so significant. If the currency pair is removed immediately above or falls as a rock, there is a good chance that the market was surprised. The key is to wait five minutes before you start trading, make sure that the currency reacts as it should. In other words, a positive surprise is to increase the currency pair higher, and the negative surprise – lower.
3. Is surprised market sentiment Compliant?
The third question is important, because sometimes economic data – this is what we usually expect to cause a greater reaction, but, for whatever reasons, the rally quickly fuss or traders simply do not care.
This usually happens when something else obscure the data and moves the general sentiment in the forex market. It can be anything – from risk appetite to the US data or with European problems. If the economic data surprise or "bases" correspond to the preferred market sentiment is stronger trade. In other words, if the market wants to buy dollars, and retail sales are strong, it usually gives Forex traders even more reasons to send the loan above. However, if the market worried about the forecast of the US economy as the Federal Reserve warned that ahead there will be more problems, good data may not do much for the dollar because it can be treated with skepticism.
Quantitative evaluation of the prevailing sentiment can be difficult in the market, but the moving averages can help, since they measure the current trend in the market, taking into account a certain number of past prices. If the data is good, and the currency pair is trading above the moving average of 50 periods in the 5-minute chart (or data forcing the currency to break above the moving average), then there are more chances that sentiment and fundamentals of trade support. However, if the data is good, and the currency pair is trading well below the average of 50 times the average, it indicates that the prevailing mood is not supported by economic surprise. In this case, we will not take the trade because we want to as many key variables were aligned in our favor.
To sum up, we want to trade only important economic data that have big enough surprises to cause a reaction in the currency, and only in that case, if the economic data are consistent with the general mood of the market. With these recommendations, let me show you how to work fast and furious trading news.