The most important component in any fundamental analysis of dynamic price movement is understanding the factors on which market participants are basing their evaluations. If you want to know the future direction of currency movements, then you must actively seek out forex news.
Fundamental vs Technical Analysis
Causation of price movement is often described as originating either based on factors related to the underlying instrument (fundamental analysis) or to factors related to the price itself (technical analysis). In either case, you must pay attention to forex news, whether it consists of underlying factors or price data. Even if your focus and orientation are technical, knowledge of the data surrounding the price (volume, volatility, trending metrics, and more) are necessary to give you a competitive trading edge. And for most successful market participants, who use a combination of all available information with their own unique insight, access to the latest breaking information is the basis of their endeavors.
The Importance of Forex News
The simple truth is, forex news drives the market. Financial and political events directly impact the market, no matter where these events occur. A political revolution or an earthquake will have a huge impact on a specific country and on its currency. Therefore, all currency pairs related to this country will also be affected. And this kind of forex news is exactly what an experienced and smart forex trader will make use of. Once you get the right information at the right time, you can adjust your trades and turn a profit.
Online forex market-makers and brokers offer a variety of channels to help you track forex news and perform fundamental analysis. As part of your evaluation process of potential forex platforms and brokers, include an assessment of their market information supply. This data usually requires no commitment on your part, enabling you to potentially continue to enjoy a summary/broadcast source without requiring usage of their services. Similarly, reputable industry communication outlets, like the Wall Street Journal and Financial Times, despite their selective firewall practices, enable and encourage readers to subscribe to email newsletters wherein breaking news is regularly conveyed.
Avoid This Mistake
While ignorance is bliss, trading with less knowledge than other market participants is blatantly self-destructive. And while exposure to the cacophony and multitude of opinions and facts can result in more stressful decision-making, a winning formula requires no less. Find out why it is important to always be aware of forex news and how it can help you successfully trade online.
Interesting Examples
The single greatest factor in currency evaluation is relative interest rates. The value of a currency to external investors is largely composed of the returns available by holding securities denominated in that currency. Additionally, macroeconomic and political news affect currency evaluation by the additional insights on what is the currency economy's true underlying worth. Among the forex news events that warrant your regular attention are:
- Following housing markets news to get insight into a country's most important physical asset
- Following news related to central banks and international organizations is important to get an overall global picture.
- Understanding where an economy is within its expansion cycle helps you to understand future interest rate changes and from that, currency value.
Finally, periodic events like elections and one-off occurrences like weather-related disasters are all part of the information set that comprises forex news.
