How to Trade the News
We all know that news moves markets. When an economic release comes out, markets can react violently as traders enter and exit positions based on the new information.
Some news releases are more important than others. Non-farm payrolls (released on the first Friday of each month), CPI (inflation figures) and central bank announcements typically move the needle more than most, and these events see the sharpest price spikes.
There is good reason for this. Central bank announcements like rate hikes directly affect the money supply which has a major bearing on the economy, while CPI figures or unemployment numbers can influence central bank policies.
These days, sophisticated algorithms are able to process news releases in a blink of an eye and move the market accordingly. Financial markets therefore adjust quickly to the new information. Even so, the biggest news releases create opportunities in the market because they can cause long lasting price moves and momentarily distort the efficiencies of the market.
Is It Foolish To Ignore The News?
Believe it or not, there are a large number of amateur traders who ignore news events and economic releases completely. They concentrate solely on technical indicators and chart patterns. Then they wonder why the market spiked violently against them in the space of a couple of minutes.
Other traders acknowledge the importance of news releases but they see them as unpredictable and too risky to trade. For the most part, they have been taught to trade during quiet markets and to always be flat whenever a big news release is coming out.
In truth, there is nothing wrong with this approach. News releases are certainly unpredictable and they can turn your winning trades into losers if you’re not careful.
However, I have always been taught to study the fundamentals and news releases offer good trading opportunities so long as you are selective and disciplined in your approach.
In fact, some of my best trading wins have come from reacting quickly to big economic releases such as US non-farm payrolls and Fed rate hikes. And I have previously spoken of the importance of ‘buying the rumour and selling the fact’, in effect anticipating the news release before it comes out.
In my view, news events can offer low risk trade set-ups so long as you are aware of three things: the market expectation running up to the event (what is priced in and what is not), the likely reaction from different outcomes, and the best way to play those outcomes.
Fortunately, I am not the only one to share this view and Thomas Franklin from Spring Board Your Trading has put together a Udemy course that teaches you everything you need to know to trade the news successfully.
Learn To Trade The News – Udemy Course Overview
The Learn to Trade The News course from Thomas Franklin is a guide to news trading that is geared primarily towards forex traders, though most traders will gain some benefit from it.
The course starts off with some info about broker set-up then quickly moves into what the main economic news releases are, how to play them and what to look out for.
The course then provides the resources that you’ll need to get set up with trading the news, which includes economic calendars, a website for watching central bank news, and then a live news squawk from FXPro. This squawk means you can listen to the news announcements on your computer as soon as they are released.
The Trade The News Forex Strategy
Franklin then goes over a very specific strategy for trading news releases which is based on identifying strong currency pairs prior to the release and then trading them against weaker currency pairs. Trades are typically held for one hour after the release and risk is managed as the trade is developed.
The lectures on risk management are particularly valuable and are one of the strongest parts of the course as they demonstrate practical methods for managing your trades and locking in your profits as you go, while maintaing a professional approach.
The course then concludes with over 50 live trading examples. In these videos, Franklin describes the news event that he traded, how he managed the trade and what the outcome was.
It’s interesting to watch the instructors view of the news release, how he picked the particular pairs to trade and the profit potential from those trades.
I took the course myself and I found it a very enjoyable and valuable use of time. I found particular value in lecture 17 – Setting up the FXPro squawk, lecture 13 – Trading strong vs weak, and lecture 26 – Risk management.
I also enjoyed several of the live video case studies and got some value from the student interviews at the end.
One thing I would say is that many of the case studies were shown after the trade had already been placed and in profit. It would have been nice to see more live trades placed before the announcement including the ones that did not work out as planned.
Professional traders working at hedge funds and banks know the importance of economic events and the opportunities that can be found during live news releases. But up until now, there have been very few books or courses that go into great detail about this trading approach.
This course does that and it also provides a specific strategy and framework that can be used to trade the most profitable currency pairs.
All in all, this is a much needed course that I would have been happy to have produced myself. Thomas Franklin covers the syllabus with great enthusiasm and you can tell he has a real passion for his subject.
The course covers all you need to trade the news, provides lots of practical examples and is available at a reasonable price. It is well worth the time and money invested.
I have arranged a special promotion with Udemy that allows you to get 25% off the course for the month of April. Just use this link to get the 25% discount. The coupon code for this offer is 25JBMARWOOD and expires on 1 May.