Opportunity through the Volatility of Forex News

Forex news crates volatility, the kind of volatility that causes huge price swings, and offers the highest probability that price will revisit target price level again, in the same day. In fact some times, some key price levels are swept by price several times over. Thereby offering tremendous opportunity to day traders who stand to make several 100s of pips, out of a day where the market seems to have moved around 200 pips.

The Key to Trading Volatile Markets

Day trading forex is not about investing in foreign currency, rather is about establishing a price level, as a base and then executing small trades in both directions around that base. News is usually only good for directionless trading. Rare is the case where a solid breakout move will be triggered by news and will be sustained in the following days. The probability strongly favours directionless trading on news days, and it is next to impossible to make sense of the news. This is because news seems to be kind of a binary bet, but is actually much worse than that. Some traders believe that the probability of figuring out the impact of news such as an economic report number, is even less than 20%. And not the seemingly 50%. Foreign currency trading therefore takes the form of directionless trading on such days and the best thing investors can do is look for entry points. These directional investors can still pick these extreme lows or highs created during the news day and wait for the market to vindicate them in the coming days.

Day traders and investors have a common time frame of focus, that is the 30 minute chart. Which one can use for both day trading and longer term trading. As the 30 minute chart is powerful but still relevant to a specific day’s range and potential daily market direction.

Why Traders Prefer High Frequency Trading

certainly not all of them do, but it is far more exciting to have a news day to trade, where price and uncertainty will create opportunity, rather than have quiet, dull days. And markets do in fact tend to move slowly prior to the release of news, sometimes they tend not to move at all on the trading day just before the news announcement day. Forex news offers excitement to day traders, and it helps make things more interesting through the way that the market absorbs the new data. Many times the market ends up moving in the opposite direction for the day, than that originally expected. News trading is simply the basis for intense, high frequency trading, and all traders find it interesting. After all it is volatility that creates opportunity, and most daily sessions offer limited volatility, and sometimes no great predictability to the average day trader. As markets never follow exactly predictable patterns, and what worked last week will not work this week. By the same token, this uncertainty and non predictability makes markets a real challenge, a kind of riddle which everyone wants to crack.