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Sunday, August 30, 2009

News is what moves the markets! Do you know what sort of news is important forex news? The truth is that no one will ever know how the market will react to any piece of information. We trade by guessing; of course to make ourselves feel better we call it analysis and prediction. Let's face it folks, the important news of Forex is really a lot of guess work. There are patterns of course, but if we are so stuck on patterns then shouldn't you be looking at technical analysis instead? After all technical analysts are the ones that believe that history will always repeat itself.
I want to be totally upfront with you people. The reason that the news is traded is because people believe and fear. You see this very plainly in smaller markets like the local stocks markets. One piece of rumor can send shock waves through the market and potentially wipe away millions in seconds. In the currency markets this is not so prevalent. I am not saying that the news do not affect the movements of currencies, they do but it is only for a short moment. If you have been trading long enough and kept your eyes on the news break, you will realize that there is just so much "noise" in the markets daily. If you jump at all the smallest sounds...well you will be doing a lot of exercise then.
The only important news that really have impact in the currency pairs must be news that directly influence the economy. For example for the USD it would be the non farm payroll report. If it comes out and it shows that there has been a rise in the unemployment rate, well you can be sure that it would lead to shocks for the USD.
The important forex news can change the direction of a trend if there are a series of "bad" news or "good" news that come in one after another. For example, lets say the US reserve declares an interest cut and then the non farm payroll shows that there is growth in the economy and we end if the day if a last report that tells of US economic growth. What do you think the USD will be doing? Where do you think the USD will be headed?
These reports can and will affect the long term trend of the currency. That is the power of news. For scalpers, the news also plays a part. Unfortunately as the time frame decreases the risks increases. The reason is that the trader can only see what is in front and cannot see the larger picture. You may be trading against the larger trend for all you know!
My candid advice is to stay away from news trading unless you have a lot of money to burn. All trading plans should come together with technical and price action justifications to complete it. A sole focus on just one aspect is a ticket to failure.
Dr. Joshua Geralds is a successful Investment Specialist with over twenty years experience increasing the income of people world wide. Visit http://www.pipsalot.com to learn how to make steady profits through safe trading and down load your FREE e-book "Money Management" for a limited time only

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