As you get into Trading Forex, you will learn that most of your strategies will be stemming from historical data and technical charts that are available from your brokers/trading platforms as most of these are available from their service. However, you might not have probably paid attention too, given that traders will tend to come off really technical with their approach, and would look into the trading news. There are some traders that put premium in these and would stray away from the mostly fundamental and technical approach that most would do.
Tunnel vision can be very dangerous when trading and as much as it seems very easy to look into the market and its movement based on charts, another aspect that traders should consider is being able to look at the economic and political events that can affect the market and considerably some of the factors that dip of the market has received during these significant moments.
The low down
But here is the thing that most traders will tell you. In Business Trends, there is no sure thing at all and even if you have gone through tons of videos, training and in-depth analysis from trading experts, that is still not a guarantee that you will have phenomenal gains in every trade that you make. However, as you trade based on the news, there is no way that you will get data that will show accordingly and the effect surely shows in the market. As you base your trading off regular news events, there are still many things that will emerge as a factor that will affect the trading market and basing your trades from hunches and educated guesses can still lead to heavy financial losses.
Market Condition and the changes
Another factor to consider is the Forex market is quite volatile when a significant news occurs. During these times, some Forex brokers start to widen their spreads and may give a huge increase in your trading costs. This becomes another point of concern and can reduce your potential profit in your trades.
It is known to most traders who have been in the business for quite some time that during significant news events, slippage happens. Slippage is a point of extreme volatility in the market which affects your order to get filled, that is not your requested entry but a certain point that is significantly far from it.
Of course, traders should also be aware that these things can still occur even if you put lots of emphasis on technical analysis in your trading strategy and most seasoned veterans would place trades during times of stability instead of volatility.
Trading with Caution
If you are still considering continuing trading forex based on news, there are some precautions you may make in order to alleviate the possibility of loss.
One thing you can look into is practice trading with the news and use a demo account to do this. With this process, you may simulate your trades and base the results from the market movements without the risks involved in the process. You will be able to tell whether this can be something you can infuse in your trading strategy.
Another precaution you can do is when you trade with your actual live account,Funding your business you should have formulated a risk management plan in place. As you trade with this, you can risk a small amount of your account that you would want with the stop-losses that you will need in place.
With the right amount of precaution and balance, you may be able to look into trading based on news announcements and generate large gains.