Getting the full gist about financial news can be a bit frustrating, especially when you are new in the trading world. Sometimes, you might see it has a waste of time if you find it hard to crack.
A large number of traders are still facing the challenge of understanding what they read ;may be you’re one of those traders who fill awkward just because you find it hard to understand what the new is talking about,
Or maybe you’re tired of consulting people for explanations concerning the news you read.
Well, you problem is quite solve, you just read further.
Remember, you cannot interpret a news report if you cannot understand it in depth; you must get the message the writer or report trying to convey.
Bear this in mind, one of the major steps of getting the full insight about a news report, is understanding what is written on news.
As a trader, you have to work on becoming independence Rather than depending on others for information.
It is very important that you put this into consideration, for you’ll find it useful when caring out your analysis.
A learner, who has no idea of road signal, saw the traffic light displaying red and crossed over.
There is no doubt that such trader might be in danger. Why because, he is not aware of the traffic rule.
Perhaps, his car might hit a car or get arrested for disobeying the traffic rule. He was not aware that the displayed sign is a ‘’stop’’.
However, if you are a trader and do not understand the message passed on the news, if you go ahead trading; your money can as well be in great danger.
Here are three major points you have to pick while reading a FX-news;
#1 You have to understand the impact of the report.
Understanding the impact of the news is one powerful point you have to obtain while reading / studying a news report.
Just like I mentioned earlier, you cannot interpret a report without you understanding what it is all about.
What do I mean by ‘’understanding the Impact of a Report’’?
It can be simply defined as a process of knowing how forceful an event or news can be on an underlying asset.
Moreover, If you are aware about the impact of an event then you are on the right track.
Types of impact on news/event.
- High Impact: This particular type of impact takes absolute effect as it sound ‘’High’’. It takes a strong hold by affecting the currency pair or the security commodity severely.
For instance, events like political unrest, High interest rate in monetary policy and a significant decrease on unemployment rate will definitely affect the economy of the country X.
Of course, a country with such a situation will scare investors away and have its currency value decreasing. Such a scenario can be seen as an HIGH IMPACT.
- Medium Impact: this type of impact is not too small neither is it too big. Its effect is quite strong but not as powerful as High impact.
In this situation, such news is capable of affecting country Y’s economy but its effect is not as strong as the first one.
- Low Impact: This form of impact takes it effect as it sound ‘’LOW’’. Its influence is not too effective as those ones listed above.
Below are websites that releases economic news with their impact,
#2 You must grab how long the impact will last.
This is also an important point you have to take very seriously. Knowing how long a particular effect will hold on an asset is very important.
It serves as a guild in drawing out analysis. Remember, If you want to draw out your analysis to trade, having a definite know of how long, will help you decide how much time you will hold a particular position.
Trader xx was going through a Fx- news released at the early hours of the day. He was sure of his moves and decided to get more insight on how far the impact of the news will go.
However, after completing his homework on that, he was certain of time-length the effect of the released news will last.
He had a profitable trade on that very day, because he knew when to start and stop the trade.
If you are a trader wanting to make a living out of forex, then you must pay a full attention to know how long the impact of a currency will last.
#3 You must determine the direction of the news impact.
Sure, having knowledge of where news is going is very important. As a trader, you must have seen that the direction of prices is either upward or downward.
This is one of the characteristic of a profitable trader; he makes sure that he knows where the news is heading.
His decisions will be based on the direction of the price, for if it is upward it indicates a buy signal and if it is downward it is a sell signal.
You’ll agree with me that if you ignore considering the direction of price, your decision might cost you a lot of harm.
NB: Always have a thorough analysis before making a move in trading forex.
Summary: The aim of this article is to help you know how to carry out your fundamental analysis. The listed tips are the major keys you have to focus on-which explains what you have to grab when reading forex news.