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If you could foretell

Discussion in 'Forex Daily News & Outlook' started by honeyks, Sep 21, 2010.

  1. honeyks

    honeyks New Member

    Feb 26, 2010
    Likes Received:
    If you could foretell the pairs would be at the close, you could probably make a few pips from your trade. Doubtless a lot more than a few. Anyone gifted with the capability to foresee the future would almost certainly make a fairly decent living as a forex trader!

    Thing is, the skill to foresee the future isn’t in my super-hero powers, so I make use of more down-to-earth methods to catch trends. One of the largest weapons I have in my forex trading arsenal is a solid awareness of the value of trading the news.

    There is a lot of argument about which is the best trading strategy to use. Most opt for news trading versus technical analysis. Some “traders” even opt for hurling darts at a board. I’ll listen to most theories but I kind of like having money in my trading accounts so I’m not 100% sold on the darts scheme.

    For me, trading the news is what creates the most consistent profits. Latching on to a breaking news item early on, has lead me on some of the most profitable waves in my currency trading career. Sure, some didn’t go exactly to plan, but overall, news trading has been how I paid my bills for many years.

    Proponents of technical analysis would insist that breaking news isn’t first hand information and not accurate enough to be profitable. My response? Bull. Forex News creates mass movements in both directions and catching a trend early is as good a way to almost guarantee gains as anything I know of.

    Quick example just to illustrate this. The Central Bank of Somewhere Land sees their currency as being overpriced. An over valued currency makes exports less competitive, reducing demand for goods , ultimately leading to a reduction in manufacturing output. No point manufacturing goods nobody wants to buy is there? Declining output means lay-offs, increased welfare costs and reduced consumer spending. Not exactly the best scenario for the already struggling finances of Somewhere Land.

    To counter the rise, the National Bank sells local currency on the markets. Lots of currency. Billions. Upshot? Your dollar (or Canadian Dollar or Yen) is suddenly worth a lot more of Somewhere Land’s currency.

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