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‘Trading the news’, is a phrase that is often said, but to new traders it can be a confusing statement without much context. What does it mean to trade the news? Is it simply trading a News Company, or is it trading based on a news report, this article will explain some of the intricacies of the famous strategy of ‘trading news’.

What is it? Trading the news is simply using an event, whether it be a global news event relating to a stock or sector news or an announcement from a company as a reason to enter a trade of a on a security or a derivative. A trader can only make money on a trade if the price of the chosen asset is moving.

If the price is stagnant then there is no use trying to trade it as there will be no money to be made. This is also known as volatility. In addition, traders and investors like to trade when there is a high level of liquidity as this allows for larger position sizes and easier movement in and out of a trade.

Why do some traders ‘trade the news’? There is multiple reason that trader will trade the new, but it is largely as news events act as catalyst for a shift in share price and increase in volatility. A general rule of the efficient market is that all information that is available is priced into the share price.

However, when news/announcements are first announced, the market must evaluate the worth of the news to the share price and this can happen quickly, or it can take a few days to assess. This is where money can be made when ‘trading the news’. Example In this example we have a company ABC.

ABC is a publicly listed company listed on the ASX and it share price is currently $1.00. with a market capitalisation of $1,000,000 ABC is company that creates and sells bicycles. Now imagine that this company signs a contract to sell 1000 bikes to Company DEF for $100,000 Immediately the news will be announced and the market including traders’ investors and others will have to assess how to value the contract. This will see a rush of volatility and buying/selling of the company’s shares.

Similarly, traders can trade the news relating Foreign exchange. Specifically, news from relating to the economy or an announcement from a countries Central Bank can provide a shift to the currency which triggers traders on corresponding currency pairs. In the example below, the Reserve Bank of Australia had just announced an increase in the interest rate for the cash rate largely in line with analyst expectation.

Some notable observation about the chart includes an initial influx of volume and increase in range for the candles relative to average levels. What is ‘Selling the news?’ It has been established that trading the news is when traders will try and use news catalysts as a signal for volatility when trading, however sometimes a seemingly good news event creates a sell off that can often lead to confusion on the part of the trader who taken a buy position. The reason for much of this selling goes back to the first question.

Why do traders trade the news? The market is trying to put a value on the announcement. Furthermore, this can be compounded by what are known as ‘trapped sellers.

The concept of trapped seller is that when a stock creates a gap above a previous closing price based and that gap is above previous long terms resistance zones, sellers who have been stuck in the stock long term will sell their holding at the first opportunity. This of course creates downward pressure on the price. The downward pressure incentivises short sellers and more selling occur thus causing a ‘sell the news’ type of event.

Take the following example of ASX listed company BUB. The news events were that the company had signed a contract to supply the USA with baby formular at a time when the country was dealing with a massive shortage of the formula. As we discussed above, in this chart we can see that as the market opened.

The price gapped form the previous close of $0.485 to $0.780 as the market opened. As the day wore on it became apparent that there was a great deal of long-term sellers who were using the opportunity to either take profits or cover to cover a loss. Subsequently the stock price kept falling for consecutive days as sellers continued to ‘sell the news’ Risks ‘Trading the news’ can be an inherently risky strategy, as an influx of volume comes into a stock the volatility often increases in volatility.

This means that the momentum of. If a trader is on the wrong side of the move it can be a dangerous as the price can move very quickly. Therefore, traders should be weary and have clear stops and exits points for when a trade goes the wrong way.

US indices were down today as Jerome Powell indicated that the Federal Reserve is going to increase interest rates at a higher and faster rate than currently in place. US equities dropped after Powell’s speech. Ultimately the major indices ended relatively flat by the close of trading.

The Nasdaq closed down 0.40% after taking a breather from its recent buying momentum. The Dow Jones was dragged down by Boeing after a 737-plane crash in the mountainous Guangxi region in China. The Boeing share price saw a 5.74% drop on the opening before recovering a little to close the day down by 3.60%.

The S&P500 was also choppy as it reacted the Jerome Powell’s speech but finished flat. The FTSE 100 showed gains as an uplift in commodities supported the index with oil spiking. This provided strength for the UK’s biggest oil companies BP and Shell with both rising by 3%.

The FTSE ended the day up 0.51% whilst the DAX was down 0.60%. Commodities Brent Crude Oil made a powerful move overnight rising 7.91% to 116.33 USD. This came as European Union officials debated whether to place sanctions on Russia's lucrative energy sector to pressure the country over its invasion of Ukraine.

An embargo on Russian oil similar to what the USA and the UK have done may have drastic implications for the EU in which 40% of its gas is imported from Russia. Natural gas prices also continue to remain in the upper end of their recent price range. Gold remains near its recent support levels ending the day at 1929 USD per ounce.

Cryptocurrency Bitcoin had a choppy day as BTC/USD ended flat overall. Ethereum was the better performer closing the day with a 1.87% rise. The ETH/USD continues to hold just below the $3000 resistance level.

FOREX The EUR/USD continued to be rejected at the $1.08 level after the speech from the Federal Reserve spurred USD strength. The AUD/USD has not been able to break through its recent highs of $0.74 as it proved a flat day for the pair after the previous day’s strong moves. The USD has continued its strong move against the JPY as it climbed another 0.27%.

The JPY has continued to struggle against most other currencies. The GBP/JPY has closed in on its recent area of support 157.00-158.00 JPY as seen below as it looks to potentially break out.

The stronger-than-expected US non-farm employment change data release last week saw the DXY climb strongly higher, beyond the 103 price level. With markets now anticipating that the US Federal Reserve could reinforce its hawkish stance, further upside is expected for the DXY. On the other hand, uncertainty rises over the Bank of Japan’s (BoJ) monetary policy stance following the surfacing of rumors that Masayoshi Amamiya was approached to succeed the current BoJ Governor, Haruhiko Kuroda.

The appointment of Amamiya as governor could likely see the BoJ continue with its ultra-easy monetary policy, ultimately leading to further weakness for the Japanese Yen. Technical Overview The recent change in sentiment of the DXY has led the USDJPY to pause on the previous downtrend, finding support at the 127.00 price area. The current retracement of price to the upside has seen the USDJPY break above the bearish trendline formed in November last year.

If this upward momentum continues and the USDJPY breaks above the 133.50 price level, which coincides with the 23.60 Fibonacci retracement level, this could signal confirmation for a bullish correction. The USDJPY could continue to trade higher, with the bullish momentum supported by the divergence in the Moving Average Convergence & Divergence (MACD), toward the target price level of 142.50 price level, formed by the 61.80% Fibonacci retracement level and previous swing high from November 2022.

Market response to any specific economic data release is far from standard even if actual numbers differ greatly from consensus expectations. Rather the market response is based on context of the current economic situation. This week’s non-farm payrolls, being one of the major data points in the month, is a great case in point.

There are many factors and of course the key one for you as an individual trader is your chosen vehicle you are trading (and of course direction i.e. long or short for open positions). The context of today’s impending non-farm payrolls from a market perspective is interest rate expectations going forward. This week the Fed gave the market the expected.25% cut that was already priced into currency, bond and equity market pricing.

The market response however, as this was already priced in, was as a result of the accompanying statement which was not as dovish as perhaps anticipated and a reduction in expectations of a further imminent cut. From an equity market point of view the result, despite the interest rate cut, was to sell off, whereas from the USD perspective this lessening expectation of further rate cuts was bullish. Perhaps this could be viewed as contrary to what the textbooks would suggest is a standard response.

So, onto today's non-farm payrolls (NFP) figure… Logic would suggest that a strong number is good news for the economy, and so should be positive for equities and perhaps bearish for USD. However, as this may be a critical number in the Feds decision making re. interest rate decisions, a strong NFP is likely to have the opposite effect. A weaker number is likely to be perceived as potentially contributory to thinking that another rate cut may be prudent sooner and so despite on the surface being “bad news”, it would not be surprising to see equities stronger and USD weaker.

It remains to be seen of course what the number is and the actual response but is perhaps a lesson in seeing new market information within the potential context of the current economic circumstances and of course incorporate this in your risk assessment and trading decision making. Mike Smith Educator Go Markets [email protected] Disclaimer The articles are from GO Markets analysts based on their independent analysis. Views expressed are of the their own and of a ‘general’ nature.

Advice (if any) are not based on the readers personal objectives, financial situation or needs. Readers should therefore consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice.

We frequently refer both in the articles we publish and the weekly “Inner Circle” sessions we present, to the benefits of a trading journal. However, the reality is that many traders make the choice not to measure trading despite the logical benefits of doing so. Whether you do or don’t currently, the bottom-line decision you are making is not only whether you do or don’t but how that positions yourself with your trading development.

We would suggest that this overall choice can be broken down into the following three sub-choices. You can make the decisions that are right for you subsequently. Sub-choice 1 – Measuring your system You are either making the choice to: Have certainty on not only whether your trading plan as a whole can create positive outcomes but have evidence to know which component parts of your plan are e.g. indicators you use for entry and exit, comparing strategies you trade, timeframes that work best for you, (and which are not) contributing to such outcomes.

Additionally, it allows you to compare what would happen if you change some of the perimeters on your potential results. OR You have no evidence as to whether your system as a whole and its components parts are working well to serve you in getting the results you desire. Nor do you can test and gather evidence as to what the impact of nay changes you may make to that system, Ask yourself… If I am serious about trading results which choice should I make?

Sub-choice 2 – Measuring you as a trader You are either making the choice to: Know the degree to which you are following your plan or otherwise so you can ultimately make a judgement on: a. Whether your system is working for you (all the points in sub-choice 1 above CANNOT be made unless you are following your plan religiously). b. What you need to work on in terms of tightening your behaviour e.g. on exits or entry c.

Whether there are certain market conditions which you find difficult or are ill-prepared for (so you can fill any knowledge gaps or avoid in the future). OR You can continue to trade as you do, avoiding any self-assessment and growth, and the refinement of your behaviour that may contribute to more positive trading outcomes. Ask yourself… If I am serious about trading results which choice should I make?

Sub-choice 3 – Improving your trading (closing the circle) (let’s assume you are keeping a journal for this one) You are either making the choice to: Measure with purpose that has clear follow through into further development and refinement of your trading plan and subsequently your actions. This facilitates the development of you as a trader based on your individual character and trading style. In practical terms, you ‘close the circle’ with a defined review and develop an action plan based on your review to test and change parts of your plan.

This is evidence-based trading! OR You can measure for measurements sake to on the surface appear to be “doing a right thing” but in reality, failing to unleash the real power of journaling, that is to make an on-going and continuous positive difference to your trading outcomes. Ask yourself… If I am serious about trading results which choice should I make?

In summary, if you have made the choice to read this article to its end you are left with one ultimate choice…to journal or not to journal including the three sub-choices that dependent on which you are making can impact on your trading. So, for one last time, Ask yourself… If I am serious about trading results what should my actions be with what I have read in this article? Our next steps and Share CFD education programme both have indicative trading journal templates to help get you started, and we would be delighted if you could join us.

Mike Smith Educator GO Markets Disclaimer The articles are from GO Markets analysts based on their independent analysis. Views expressed are of their own and of a ‘general’ nature. Advice (if any) are not based on the reader’s personal objectives, financial situation or needs.

Readers should, therefore, consider how appropriate the advice (if any) is to their objectives, financial situation and needs, before acting on the advice. Find additional Forex trading education resources here. Next: 5-point checklist for using chart patterns within your tradin

Success leaves clues, and over the years as an educator and coach, I can confidently say that there are several things that traders who achieve positive trading outcomes appear to do, that less successful traders are not doing. One of these is to have a daily agenda or habits that go alongside direct trading activities with the aims of getting and staying in the optimum “state” to trade and to facilitate consistency in action. Here are 5 observations to consider… #1 – Check in on your potential “trading state” before you look at the market We have discussed in previous articles the advantages of making decisions when you are in an optimum state to do this.

I highly recommend you read my 10 Ways to Manage Your Trading Psychology – a Blueprint for Development post if you haven't already. If one constantly interacts with the market, consistent and constructive action may be more difficult. Therefore, logically "checking in" where you are before you start your trading day becomes even more necessary.

It may be there are things going on in your non-trading world that are significant enough to be a justifiable distraction and require attention, or you are not in the best of health. However, it's important to realise that the markets WILL always be there. There are times when it is good to trade and times when you should give yourself permission not to. #2 – Re-align with trading purpose and plan at the start of your trading day Your trading purpose, or your reason for trading, is your start point for developing strategies that are consistent with your trading objectives.

Your trading plan is your “guiding light” in making this purpose happen. Every trading decision should relate to these, and without it, traders have a lower chance of creating the trading outcomes they desire. In the “heat of the market”, it is easy to get “sucked in” to the price action of open trades as you see your trading capital moving up and down.

Without the explicit instruction of a pre-prepared plan, it becomes more difficult to maintain the consistency and clarity that it is already characteristic of experienced traders. Touching base, or re-aligning with these at the start of your trading day offers a reminder as to the why and how you will think, decide and act in the hours to come. #3 – Make a judgment on what to expect Every day the market throws up different challenges, different price movements, volatility, and new economic information, influencing overall market sentiment. Advanced traders take the time to make an overview judgment on what is happening and adjust decisions on time-frames traded, risk level or chosen strategies, accordingly.

For example, one of the possibilities we have discussed in a previous article and in Inner Circle sessions is the concept of adjusting risk level according to the strength of the signal or underlying market conditions. What we mean by this is that if our normal tolerable risk level is 2% of our trading account capital on each trade as a standard and we note increased market uncertainty indicated by higher price volatility, but identify a potential opportunity for entry, we may adjust that risk level to 1% in light of this observation. Having a system to make a judgment prior to trading allows this sort of approach to be taken, making it an unquestionable attribute of an experienced trader. #4 – Check in with yourself at key points during your trading day Your emotional state can, and often will change throughout your trading day, primarily dependent on either the results you are getting or your judgment on performance.

We are all familiar with the concept of ‘revenge trading’ if a trade, or series of trades move against you. This is at the extreme end of capital damaging emotional state. Equally and more insidiously dangerous is a succession of wins or losses where your consistency may waver, either originating from a belief that you can perhaps “feel the market” or begin to doubt yourself as a trader.

A potential solution is to have it written in your plan that if either of these scenarios is the case, then you could move away from the market for a period of time, enabling you to reset, re-align and revisit the market later on with a refreshed sense of purpose and plan. #5 – Review your day including completion of journaling tasks Formal review of performance is a critical part of on-going trading development. We have discussed many times the benefits of keeping a journal record of your trades, within not only measure outcomes, but the decisions that were taken to create these. Completing your journal daily may identify common threads of both things that went well (and you can mirror going forward) as well as potential areas for development.

Experienced traders who do this give themselves that important chance of sustainable growth which appears to be a key factor in long term trading outcomes. To summarise, you always have a choice as to whether you integrate what you read into your trading. In this case, it is the choice of having a daily agenda that can contribute positively to your long term trading strategy.

Every week I run education webinars offering innovative and comprehensive learning across all aspects of trading knowledge and practice. If you would like to expand your knowledge and build your confidence as a trader while also connecting with other Forex and CFD traders, register here.