HOW TO TRADE FOREX FUNDAMENTAL NEWS

News trading has long been one of the most common forex trading strategies in this field. Today, I want

to show you how to trade forex fundamental news, which are important news that impact the market

significantly.

2 main ways to trade forex fundamental news:

- Directional bias trading

- Non-directional bias trading

Directional bias trading

“Directional” means that you expect the price to move in a certain direction after a news release. When

a trader knows about some news that can make the price move, he/she will look for trading

opportunities in a certain direction.

How to trade

To put it simply, you apply this forex trading strategy by predicting how a certain news can affect the

market and where the price would go. Your prediction should base on how the market reacted to similar

news before.

Let’s have an example:

The unemployment rate in the US is constantly rising. 6 months ago, it was at 1% and last month, it

reached 3%. You believe that the upcoming data will show that unemployment rate would continuously

rise, so USD value would decrease. In this example, you’re trying to sell the USD/JPY pair.

At least 20 minutes before the news release, you should look at the price movement of USD/JPY and

figure out the movement range. Take note of the peak and bottom, which would become your breakout

points later.

Since you predict that USD will decrease, pay attention to the lower breakout point of that range. Set

your Entry Point at a few pips lower than that lower breakout points. Then, set a Stop Loss at the upper

breakout point and Take Profit by the number of pips between those breakout points.

When the news is published, there will be two scenarios:

• If the news is not what you expected, which would make USD/JPY rise, your orders will not be

executed. Nothing happens.

• If the news is what you expected, now you just need to sit and watch the trade happens. Then,

you just need to take profits.

The key to properly assessing trends is that you have to understand the concepts behind the

fundamental news you intend to trade. If you do not understand the effect it has on specific currencies,

you can make the wrong decisions that cause losses to your account.

Non directional bias trading

The more common way to trade forex fundamental news is to approach the market in a non-directional

way. This method will skip guessing the direction of the prices and focus on a simple fact that the market

will definitely move in a certain direction whenever there’s big news. This means no matter which

direction the market will head, you’ve already had a forex trading plan for it.

For this method, you don’t need to try to guess whether the price would go up or down. That’s why it is

called non directional.

How to trade

For this method, you don’t need to guess whether the price will rise or fall after the news release. You

can still trade and take profits as long as the news is big enough to affect the market. When news such

as economic data or central bank announcements are released, traders should keep in mind that news

like those often impacts the market the most.

Similarly, you should figure out the movement range and breakout points at least 20 minutes before the

news release. The breakout points will be your entry points. You should set Stop Loss at 20 pips above

and below the breakout points and Take Profit at the similar range.

For this method, you will trade in either direction. No the matter which direction the price will take,

you’ll have pending orders for both direction. This prepares you for every scenario. If the price moves in

another direction, it will soon hit Stop Loss and your order is closed. If things go smoothly, you will not

face any losses.

One of the best things about non directional bias trading is that it completely removes your emotions

from the equation. No matter how you feel about the news, you have to follow the exact procedure

strictly.

Conclusion

There are many ways of how to trade forex fundamental news, but these are the 2 most common

methods. Like in any other trading methods, you need to take time to practice. To be more successful in

the news trading method, you need to study economic indicators to understand why they are

important. And remember that no success comes easily, so be patient and you will find that news

trading is very rewarding when you understand it!