News Trading and Economic Events
Economic news releases create the biggest price moves in forex. Learning to trade them gives you an edge during volatility.
High-Impact Economic Events
Central Bank Decisions
- Interest rate announcements
- Monetary policy statements
- Press conferences
- Can move markets 100-500+ pips
Employment Data
- Non-Farm Payrolls (NFP) - first Friday monthly
- Unemployment rate
- Average hourly earnings
- Typically 50-200 pip moves
Inflation Data
- Consumer Price Index (CPI)
- Producer Price Index (PPI)
- Core inflation readings
- 30-150 pip moves typical
GDP Reports
- Quarterly economic growth
- Advanced, preliminary, final readings
- Sets economic outlook
News Trading Strategies
Straddle Strategy
- Place pending buy and sell orders before the news
- Set orders 15-30 pips from current price
- News triggers one order
- Cancel the other order
- Trail stop as price moves
Fade the Spike Strategy
- Wait for the initial news spike
- Let the spike reach an extreme level
- Enter against the spike as price reverses
- Stop beyond the spike extreme
- Target: 50-70% retracement of the spike
Post-News Trend Strategy
- Wait 15-30 minutes after the release
- Let the market digest the data
- Identify the new trend direction
- Enter on the first pullback
- Use the news spike high/low as your reference
What to Watch on the Calendar
Impact Levels
- High Impact: Trade or stay out (red events)
- Medium Impact: Be aware, adjust position size
- Low Impact: Usually safe to ignore
Key Currency Pairings
- USD: NFP, CPI, FOMC
- EUR: ECB decisions, German data
- GBP: BOE decisions, UK employment
- JPY: BOJ decisions, inflation
- AUD: RBA decisions, employment
Risk Management for News
- Reduce position size during high-impact events
- Widen stops to account for spread widening
- Be aware that spreads can spike 5-10x during news
- Never risk more than 1% on news trades
- Consider staying flat if unsure
Common Mistakes
- Trading every news event (overtrading)
- Not accounting for spread widening
- Using too-tight stops during volatility
- Ignoring the actual data, just chasing the move
- Holding positions through news without awareness
Key Takeaways
- Know the calendar before each trading day
- Focus on high-impact events only
- Have a specific strategy for news trading
- Always account for increased volatility and spreads
- Sometimes the best trade is no trade during news