Many traders try and trade breaking Forex news stories and guess which way the market is going to go but that’s a mugs game however you can use news stories to make bigger profits and here we will show you one simple way of doing so -it’s easy to understand and can make you some great profits.
Today, we have better news and faster delivery than ever before – but this doesn’t make it easier to trade and the reason is simple – markets don’t respond to the news itself, they move to how traders view the news. Its also a fact that markets always collapse when the news is most bullish and rally when its most bearish. If you want to use the news to make bigger profits, you need to learn to “buy the rumour sell the fact” – lets look at an example.
If you have an interest rate meeting by a central bank and the consensus amongst traders is that rates will rise and the currency will strengthen, this news is already factored into the price. If for example the Central bank do raise rates, you very often see prices come down not go up, as the news is fully discounted. Of course if you get a bearish surprise prices come off even harder.
All you need to do is to look for a currency which is overbought or oversold and then look for bullish or bearish news that is priced in. Look for an event such as a central bank meeting with an interest rate rise or cut factored in. Then check resistance or support and wait for the news and take a contrary trade to the majority of traders and look for falling momentum on your charts to support your view and support or resistance to hold.
Markets move on investor sentiment not the news itself and when a currency becomes overbought or oversold, look to take a contrary stance on breaking news and you will have low risk and high reward and can make some nice Forex profits.