A quick Yahoogleing (that's Yahoo, Google, plus Bing) search of "forex + news" or "forex + data" returns a measly 30 million results combined.
30 MILLION! That's right! No wonder you're here to get some education! There's just way too much information to try to process and way too many things to confuse any newbie trader. That's some insane information overload if we've ever seen it.
But information is king when it comes to making successful trades.
Price moves because of all of this information: economic reports, a new central bank chairperson, and interest rate changes.
News moves fundamentals and fundamentals move currency pairs!
It's your goal to make successful trades and that becomes a lot easier when you know why price is moving that way it is. Successful traders weren't born successful; they were taught or they learned.
Successful traders don't have mystical powers (well, except for Pipcrawler, but he's more weird than he is mystical) and they can't see the future.
What they can do is see through the blur that is forex news and data, pick what's important to traders at the moment, and make the right trading decisions.
Where to Go for Market Information
Market news and data is made available to you through a multitude of sources.
The internet is the obvious winner in our book, as it provides a wealth of options, at the speed of light, directly to your screen, with access from almost anywhere in the world. But don't forget about print media and the good old tube sitting in your living room or kitchen.
Individual traders will be amazed at the sheer number of currency-specific websites, services, and TV programming available to them. Most of them are free of charge, while you may have to pay for some of the others. Let's go over our favorites to help you get started.
Traditional Financial News Sources
While there are tons of financial news resources out there, we advise you to stick with the big names.
These guys provide around-the-clock coverage of the markets, with daily updates on the big news that you need to be aware of, such as central bank announcements, economic report releases and analysis, etc. Many of these big players also have institutional contacts that provide explanations about the current events of the day to the viewing public.
Real-time Feeds
If you're looking for more immediate access to the movements in the currency market, don't forget about that 65-inch flat screen TV in your bathroom!
Financial TV networks exist 24 hours a day, seven days a week to provide you up-to-the-minute action on all of the world's financial markets.
In the U.S., the top dogs are (in random order), Bloomberg TV, Fox Business, CNBC, MSNBC, and even CNN. You could even throw a little BBC in there.
Another option for real-time data comes from your trading platform.
Many brokers include live newsfeeds directly in their software to give you easy and immediate access to events and news of the currency market. Check your broker for availability of such features not all brokers features are created equally.
Economic Calendars
Wouldn't it be great if you could look at the current month and know exactly when the Fed is making an interest rate announcement, what rate is forecasted, what rate actually occurs , and what type of impact this change has on the currency market? It's all possible with an economic calendar.
The good ones let you look at different months and years, let you sort by currency, and let you assign your local time zone. 3:00 pm where you're sitting isn't necessarily 3:00 pm where we're sitting, so make use of the time zone feature so that you're ready for the next calendar event!
Yes, economic events and data reports take place more frequently than most people can keep up with. This data has the potential to move markets in the short term and accelerate the movement of currency pairs you might be watching.
Lucky for you, most economic news that's important to forex traders is scheduled several months in advance.
Market Information Tips
Keep in mind the timeliness of the reports you read. A lot of this stuff has already occurred and the market has already adjusted prices to take the report into account.
If the market has already made its move, you might have to adjust your thinking and current strategy. Keep tabs on just how old this news is or you'll find yourself "yesterday's news."
You also have to be able to determine whether the news you're dealing with is fact or fiction, rumor or opinion.
Economic data rumors do exist, and they can occur minutes to several hours before a scheduled release of data. The rumors help to produce some short-term trader action, and they can sometimes also have a lasting effect on market sentiment.
Institutional traders are also often rumored to be behind large moves, but it's hard to know the truth with a decentralized market like spot forex. There's never a simple way of verifying the truth.
Your job as a trader is to create a good trading plan and quickly react to such news about rumors, after they've been proven true or false. Having a well-rounded risk management plan in this case could save you some moolah!
And the final tip: Know who is reporting the news.
Are we talking analysts or economists, economist or the owner of the newest forex blog on the block? Maybe a central bank analyst?
The more reading and watching you do of forex news and media, the more finance and currency professionals you'll be exposed to.
Are they offering merely an opinion or a stated fact based on recently released data?
The more you know about the "Who", the better off you will be in understanding how accurate the news is. Those who report the news often have their own agenda and have their own strengths and weaknesses.
Get to know the people that "know", so YOU "know". Can you dig it?
Market Reaction
There's no one "All in" or "Bet the Farm" formula for success when it comes to predicting how the market will react to data reports or market events or even why it reacts the way it does.You can draw on the fact that there's usually an initial response, which is usually short-lived, but full of action.
Later on comes the second reaction, where traders have had some time to reflect on the implications of the news or report on the current market.
It's at this point when the market decides if the news release went along with or against the existing expectation, and if it reacted accordingly.
Was the outcome of the report expected or not? And what does the initial response of the market tell us about the bigger picture?
Answering those questions gives us place to start interpreting the ensuing price action.
Consensus Expectations
A consensus expectation, or just consensus, is the relative agreement on upcoming economic or news forecasts. Economic forecasts are made by various leading economists from banks, financial institutions and other securities related entities.
Your favorite news personality gets into the mix by surveying her in-house economist and collection of financial sound "players" in the market.
All the forecasts get pooled together and averaged out, and it's these averages that appear on charts and calendars designating the level of expectation for that report or event.
The consensus becomes ground zero; the incoming, or actual data is compared against this baseline number. Incoming data normally gets identified in the following manner:
- "As expected" - the reported data was close to or at the consensus forecast.
- "Better-than-expected"- the reported data was better than the consensus forecast.
- "Worse-than-expected" - the reported data was worse than the consensus forecast.
However, let's remember that forex traders are smart, and can be ahead of the curve. Well the good ones, anyway.
Many currency traders have already "priced in" consensus expectations into their trading and into the market well before the report is scheduled, let alone released.
As the name implies, pricing in refers to traders having a view on the outcome of an event and placing bets on it before the news comes out.
Well, that's a tough one.
You can't always tell, so you have to take it upon yourself to stay on top of what the market commentary is saying and what price action is doing before a report gets released. This will give you an idea as to how much the market has priced in.
A lot can happen before a report is released, so keep your eyes and ears peeled. Market sentiment can improve or get worse just before a release, so be aware that price can react with or against the trend.
There is always the possibility that a data report totally misses expectations, so don't bet the farm away on the expectations of others. When the miss occurs, you'll be sure to see price movement occur.
Help yourself out for such an event by anticipating it (and other possible outcomes) to happen.
Play the "what if" game.
Ask yourself, "What if A happens? What if B happens? How will traders react or change their bets?"
You could even be more specific.
What if the report comes in under expectation by half a percent? How many pips down will price move? What would need to happen with this report that could cause a 40 pip drop? Anything?
Come up with your different scenarios and be prepared to react to the market's reaction. Being proactive in this manner will keep you ahead of the game.
What the Deuce? They Revised the Data? Now what?
Too many questions... in that title.But that's right, economic data can and will get revised.
That's just how economic reports roll!
Let's take the monthly Non-Farm Payroll employment numbers (NFP) as an example. As stated, this report comes out monthly, usually included with it are revisions of the previous month's numbers.
We'll assume that the U.S. economy is in a slump and January's NFP figure decreases by 50,000, which is the number of jobs lost. It's now February, and NFP is expected to decrease by another 35,000.
But the incoming NFP actually decreases by only 12,000, which is totally unexpected. Also, January's revised data, which appears in the February report, was revised upwards to show only a 20,000 decrease.
Not having known that January data was revised, you might have a negative reaction to an additional 12,000 jobs lost in February. That's still two months of decreases in employment, which ain't good.
However, taking into account the upwardly revised NFP figure for January and the better than expected February NFP reading, the market might see the start of a turning point.
The state of employment now looks totally different when you look at incoming data AND last month's revised data.
Be sure not only to determine if revised data exists, but also note the scale of the revision. Bigger revisions carry more weight when analyzing the current data releases.
Revisions can help to affirm a possibly trend change or no change at all, so be aware of what's been released.
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