I guess you already noticed how impulsively the markets may react to economic events and news.
In this article, I will teach you a simple strategy to follow during important news releases and how to trade news.
1. Sort out the economic calendar
There are a lot of news in the economic calendar.
They are not equal in their impact.
Most of the economic calendars indicate the potential significance of each event: while some news have low importance, some have medium importance and some are considered to be extremely important.
For example, above is the list of coming UK fundamental news.
You can see that these news have different degree of importance.
My recommendation to you is to sort out the economic calendar in a way, so it would display only the most important news.
Among the news that we discussed above, only one release has high importance.
2. Know on what trading instruments does the news have an effect
While some of the news in the economic calendar may impact many financial markets and trading instruments, some news may affect very particular instruments.
For example, a FED Interest Rate decision may have a very broad effect on financial markets.
At the same time, Interest Rate Decision in Australia may affect only Australia - related instruments.
3. Don't trade one hour before the news and one hour after the release
Once you see the important fundamental news coming, don't trade the trading instruments that can be affected by the news 1 hour before and after the release.
For example, in 5 minutes we are expecting important UK news - CPI data.
I stopped trading GBP pairs 1 hour before the release of the news, and will resume trading them one hour after the release.
4. Protect your trading positions 5 minutes ahead of the news
If you have an active trading position and related important news are expected, move your stop loss to entry 5 minutes ahead of the release of the news.
For example, I have a short trade on GBPAUD. I see that in 5 minutes important UK data is coming. I will move stop loss to entry 5 minutes ahead of the news and make a position risk-free.
I always say to my students, that news trading is very complicated. Due to a high volatility, it is very hard to make wise decision during the news releases.
The approach that I suggest will help you to avoid all that and trade the markets when they are calm.
