Page 86 - Ultimate Guide to Currency Trading

weeks. This will help you get a grip on the fact that your FX pair has most likely moved up and down as
the market reacted to developing news. Upon a second look, you may even notice that market
sentiment went back and forth over time. When you record these observations you then have a
historical reference to ask your-self, "Am I reacting to the news just like the market, and being led
around like a lamb?" and then ask yourself, "What has it (the currency pair) done before in these
situations?" Finally, you will have the ability to have a point of reference to help answer the question,
"Will the market come back (if you are under water with the trade and it is in a losing situation) or will
the market swing back to the point where the trade can be closed out at break even with zero loss?" A
trading or news journal can help you keep yourself on top of developments before they happen, and it
can help you determine if now is really the right time to get out of a trade.

Trading with the News

Reading the Wall Street Journal, (http://online.wsj.com/home-page), The Economist,
(www.economist.com), or Market Watch (www.marketwatch.com) gives you access to the news of
the day that is in relation to the economies of the world. The news of the economies and markets of
the world in turn affects the ideas that the traders of the world have on the future capital inflows into
an economic region, the future growth rates of an economic region, and even the future interest rates
of that region's central banks. It is a give and take: The economic news causes a reaction in the FX
markets, and the FX markets cause a reaction in the economies of the home (and trading partners)
economies. With this in mind, it is best to keep ahead of the news and plan your trades to work with
the news.

Some currency brokers will allow you automatically to subscribe to two or even three
different FX news feeds. These currency brokers will also allow you to have a news
feed window open directly on your trading platform which can give you instant access
Essential to the information.

The news can be a currency trader's best friend, and certainly ranks up there with
fundamental analysis and technical analysis to help select and time good FX trades. Ultimately, it is the
addition of the process of watching the news to a strong fundamental analysis and knowledge of
technical indicators that can make your trading system lock tight; the news can make your trades
statistically more profitable in the short, medium, and long time frame.

There are several factors that can cause a currency pair to move in either direction. These
factors could be macro events such as a banking crisis, or they could be events that are isolated to a
particular country, such as surprisingly good (or surprisingly poor) economic news about one of the
ends of the currency pairs. Between these extremes is almost every bit of event and news
development imaginable, from a country's leader making a televised speech, to hurricanes and