Believe it or not, there are so many instances when technical setups were ruined due to sudden economic news released that either accelerate or reverse the existing trend and market momentum, creating gigantic spikes that either hit your TP or SL (if you have one). One of the best Central Bank that likes to surprise the market from time to time is no other than the BOJ. (Bank of Japan)
To make it worse, retail traders like us especially the newbies have no idea on what was going on. If they got lucky, they may be riding a favorable move that happened to be breaking out right after their entry. Nevertheless for those riding on the opposite site, most will probably be clueless on what was happening and only realized that they were on the wrong side of the market once the official news hit the wire.
So, please be careful.
The point here is simple. If you are a serious trader, regardless whether you are a swinger or (especially) a scalper, please take serious note on all potential economic news for the day, weeks and months. There are many websites out there that highlights these daily and weekly economic news and one of my favorite is forexfactory.com. On top of that, you can also have these on your i-Phone or Android by simply downloading free applications like MyFxBook from the Play Store.
At the same time, do not forget to also check the major news channel and website like Bloomberg, Telegraph, FT, CNBC and CNN since keeping yourself update on the latest central banks policy as well as the current geopolitical sentiment like Brexit, US Presidential election, Turkey Coup attempt, terrorist attacks, QE and stimulus plan is a must since these news will somehow move the market.
I do not ask you to become a market specialist or an expert economist, but again keeping yourself update is a must. All you need to do is just read the headlines, to say the least. It will keep your market views between technical and fundamental in balance at all time. This in return will provide you with the additional edge that you definitely need in making sound trading decisions, regardless of going long, short or simply stay out from the market for any pair that you wish to trade.
You know why this is important? Regardless of how technical you are, the market is always fundamentally driven by humans. Traders are made of humans that conceal the emotional feeling of greed and fear at all time.
Therefore as a serious trader, it is our task to continuously analyse and understand the market's behavior and psychology based on the latest sentiments. Sentiment in my simple definition, is the market's believe that will normally last longer than you expected until the next news hit the wire.
On the other hand, no doubt that technical move works best when there is no big news around the corner, in which market technicians will utilize all sort of technical tools available in their trading platform to speculate the next potential move by market participants, especially the Moving Averages', Fibonacci, Support and Resistance Levels, RSI etc just to name a few. You too should take advantage accordingly when this is happening since the conditioning of market's psychology will be probably based on equal technical perspective.
But when big news like the NFP, FOMC, Interest Rate, GDP, CPI/PPI etc, most market technicians will stay away at least for a while due to potential high volatility that these news will bring once the figures are released. So again, please be careful.
Now back to the original topic above, again please respect the news but listen to the market.
What is meant here is very simple.
Whenever there are significant economic news for the week or the day, say NFP at 8.30am EST on the first Friday of the month, take note on the data released at that particular time. So unless you want to gamble with your trade, it is worth to respect these specific time and do not assume how the market will react. No one knows for certain.
Now it comes to the listening part.
After the news release, do not bother about the economic figure so much. What matters now is how the market response to that figures? What sort of sentiment is created after this news released?
This is definitely more critical to your trading decisions since you should not blindly going long for the USD even though the US data were super positive. How the market response must be observed and listened closely since there are many underlying reasons that generates the bullishness or the bearishness of the market participants in general. Movement could be in favor to the USD due to Risk Aversion but can also go against the USD due to Risk Appetite.
The easiest way is let the market settle down, and follow the trend afterwards.
In short, pay attention to the news release, understand the sentiment and later just follow the trend based on the price action. The good thing on paying attention to these news release as well as observing the market's response is that it will provide you with better entry opportunities, regardless what position that you are taking in the market.
There is no need to be emotional here. Just accept the fact that the market is always right, regardless what they are doing. If you cannot stand the heat, just stay out at least for a while. Period.
