HOW TO TRADE: Trading News Events - Some Helpful Hints

A currency is a proxy for the country it represents, therefore the economic health of that country is priced into the currency. Economic indicators measure the health of an economy. The challenge is keeping track of each particular country's economic health.
Know when indicators are due to be released. It is important to keep an eye on the future and knowing which news releases the market deems most important.

Why are some indicators more important than others?
Current market conditions will influence which news the market deems most important. Know which economic indicators are capturing most of the market's attention. When the US is incurring large trade deficits, the market will focus on Trade Balance data. Its news release can catalyze large volume and price movements. Moreover, during an US economic boom with high employment, the market will not focus on unemployment.

Economic conditions can change. Large US Trade Deficits can weaken the US Dollar over time. When the US Dollar is weak the market will shift its focus to inflation. Market watchers will shift focus to CPI and FOMC Interest Rate Decisions in the news.

The data itself is not as important as whether or not it falls within market expectations. Know when the data is released in addition to what market forecasters are expecting for each indicator.

Once you know the market expectation for the economic indicator, pay attention if the consensus number is met. A drastic difference between the consensus and actual results can cause price movement.

The consequences of an unexpected monthly rise of 0.3% in the Consumer Price Index, the Actual, is not nearly as important to your short-term trading decisions as it is to know that this month the market was looking for CPI to fall by 0.1%, the Consensus.

Wait until after you've taken advantage of the short term trading opportunities presented by the data, typically within the first thirty minutes following the release, to analyze the longer-term ramifications of an unexpected monthly rise in consumer prices.

Technical analysis will not work when fundamental factors or economic data becomes the main focus of the market as participants become sensitive to any developments. With speculation mounting on the possible outcomes, fundamental news releases like US non-farm payrolls have created situations in the market that do not adhere to technical analysis as volume and volatility spikes. Although the aftermath more than not will once again adhere, the mass speculation that ensues makes sure that traders are scrapping for the best price available in filling their positions rather than applying your everyday moving average or price oscillator.