What to focus on when news trading
It is a common fact that an all-rounded CFD trading journey involves both technical and fundamental analysis. They are both needed, with each one covering their own sides of the markets.
News trading is a style closely related to fundamental analysis. Every month, certain global events pull specific markets' strings and we are presenting you the most important ones below:
1. Employment Indicators
Countries' unemployment rates have always been crucial to both the markets and Central Banks, as an indicator of an economy's health. The higher the employment, the more the interest rates rise. Employment indicators include the Unemployment Rate and the US ADP and NFP Reports, with the NFP being one of the most widely-followed news releases, taking place every first Friday of the month.
2. Consumer Price Index (CPI)
The Consumer Price Index is one of the most widely used economic indicators to measure inflation. This index is measuring how much a basket of goods costs on average and highlights whether the same goods have become more expensive or not over a period of time. If an economy goes through inflation; interest rates will be rising to counteract the inflation effects.
3. Central Bank Meeting & Rate Decision
Each month, the world's Central Banks meet and decide on the interest rates that they are responsible for. An increase in rates usually leads to a currency's value rise. The opposite happens with a decrease in interest rates, which may result in a decrease in the currency value.
4. Gross Domestic Product (GDP)
Gross Domestic Product is an important indicator of a country's economic health. When GDP falls below a country's Central Bank expectations, its currency is expected to fall. On the other hand, when GDP exceeds expectations, the currency value tends to rise.
5. FOMC Meeting
Although each country's Central Bank meeting is very important, the US Federal Open Market Committee takes center stage, since the USD is currently the world's reserve currency. Each month, the FOMC meets to set interest rates and check if the current monetary policy works effectively. The FOMC Meeting helps traders speculate how Central Banks will behave in the future.
To conclude, all economic indicators and news releases showcase not only what each release means but how the market is expected to react. Traders may find it hard to follow the news, due to high potential volatility, however practice and education, along with your broker's support and trading tools on offer, makes the ideal package that a trader can ask for.
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article was submitted by ForexTB.
