Technical Analysis For Forex In Montreal: Insights For Success – One of the great advantages of trading currencies is that the Forex market is open 24 hours a day, five days a week (Sunday, 5:00 pm to Friday, 4:00 pm ET). Because markets move on news, economic data is often the most important catalyst for short-term movements. This is especially true for the foreign exchange market, which reacts not only to US economic indicators, but also to news from around the world. Here we’ll look at what economic indicators are released and when, what data is most relevant to forex traders, and how traders can act on this market-moving information.

Since most currency brokers have at least eight major currencies available for trading, there is always a piece of economic data scheduled for release that forex traders can use to make informed trades. In fact, seven or more pieces of data are published almost every weekday (excluding holidays) from the top eight countries with the most demand. Thus, for those who prefer to trade news, there are many opportunities. The eight major currencies are familiar to most traders:

Technical Analysis For Forex In Montreal: Insights For Success

Technical Analysis For Forex In Montreal: Insights For Success

Currencies that can be easily traded span the entire world. This means you can manually select the currencies and economic news that you focus on. But typically, since the US dollar is on the “other side” of 90% of all foreign exchange trades, US economic data tends to have the most significant impact on the Forex markets.

Research And News

Trading news is more complicated than it might seem. It’s not just the reported consensus numbers that are important, but also the whisper numbers (unofficial and unpublished forecasts) and any amendments to previous reports. Additionally, some releases are more important than others; this can be measured both in terms of the importance of the country publishing the data and in terms of the importance of the publication in relation to other published pieces of data.

Figure 1 shows the approximate times (Eastern Time) of the most important economic news for each of the following countries. This is also the time when Forex players pay special attention to the markets, especially when trading based on news releases.

When trading news, you first need to know what releases are actually coming this week. Secondly, it is also important to know what data is important. Generally speaking, the most important information relates to changes in interest rates, inflation and economic growth, such as retail trade, manufacturing and industrial production:

Depending on the current state of the economy, the relative importance of these releases may change. For example, unemployment may be more important this month than decisions about trade or interest rates. Therefore, it is important to be aware of what the market is currently focusing on.

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According to a study by Martin D. D. Evans and Richard C. Lyons published in the Journal of International Money and Finance (2004), the market may still absorb or react to news releases hours, if not days, after the release of figures.

The study found that the impact on profitability usually occurs on the first or second day, but the impact appears to persist until the fourth day. On the other hand, the impact on buy and sell order flow is still very pronounced on the third day and noticeable on the fourth day.

The most common way to trade news is to look for a period of consolidation or uncertainty before the big number and trade the breakout after the news. This can be done both on a short-term basis (intraday) and on a long-term basis. a few days. As an example, consider the chart in Figure 2. After weak September figures, the euro is holding its breath ahead of October figures, which were due to be released in November.

Technical Analysis For Forex In Montreal: Insights For Success

17 hours before publication, the EUR/USD pair was in a narrow trading range of 30 pips. (A pip is the smallest measure of change in a currency pair in the Forex market, and since most major currency pairs are priced to four decimal places, the smallest change is the last decimal place.) For news traders, this would provide an excellent opportunity to take a breakout trade. especially since the likelihood of a sudden movement at this time was extremely high.

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The chart above illustrates (with two horizontal lines forming a trade channel) the indecision and uncertainty that led to October nonfarm payrolls data, which was released in early November. Note the increase in volatility that occurred after the numbers were released.

We mentioned earlier that trading news is more complicated than you think. Why? The main reason is volatility. You may make the right move, but the market simply may not have enough momentum to support the move.

As an example, consider the chart in Figure 3. This chart shows activity following the same release as Figure 2 (but in a different time frame) to show how difficult trading news releases can be. On November 4, 2005, the market expected wages to increase by 120,000 jobs, but instead the US economy added only 56,000 jobs. The disappointment saw the dollar fall against the euro by about 60 points in the first 25 minutes after publication.

However, the dollar’s upside momentum was so strong that the rally was quickly reversed and an hour later, EUR/USD broke through its previous low and effectively hit a 1.5-year low against the dollar. Opportunities for breakout traders were plentiful, but the dollar’s bullish momentum was so strong that such poor employment figures failed to have a lasting impact on the currency’s rally. One thing you should keep in mind is that against a good number, a strong move should also result in a strong extension.

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The chart above shows that while worse-than-expected non-farm payrolls pushed the EUR/USD rate higher for a short period of time, the strong momentum in the US dollar was able to take control and head lower. Keep in mind when the US dollar strengthens against the euro.

One possible answer to a volatility breakout without the risk of a reversal is to trade exotic options. Exotic options usually have barrier levels and will make a profit or loss depending on whether the barrier level is breached. The payoff is predetermined, and the premium or price of the option depends on the payoff. Below are the most popular types of exotic options that can be used to trade news releases:

The “double one touch” option has two barrier levels. Either level must be broken before expiration for the option to become profitable and the buyer to receive the payout. If no barrier level is crossed before expiration, the option expires worthless. The double one touch option is an ideal option for trading news releases as it is a pure non-directional breakout play. As long as the barrier level is overcome (even if the price later reverses), the payout is made.

Technical Analysis For Forex In Montreal: Insights For Success

The one-touch option only has one barrier level, which usually makes it slightly cheaper than the double one-touch option. The same criterion applies: the payout is only made if the barrier is overcome before the expiration date. This is a good buy if you have a real sense of whether the number will beat or underperform the market consensus.

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Currency options are a viable alternative for those who don’t want markets to be confused by excessive volatility before they actually see the spot price moving in the desired direction; Several forex brokers offer different types of currency options.

The “double tap” option is the exact opposite of the “double one tap” option. There are two barrier levels, but in this case, neither barrier level can be crossed before expiration, otherwise the option payment will not be made. This option is great for news traders who think an economic release will be

The foreign exchange market is especially susceptible to short-term movements caused by economic news from both the United States and the rest of the world. If you want to successfully trade news in the Forex market, there are several important considerations to make: knowing when reports are expected, understanding which releases are most important in the current economic environment, and of course, knowing how to trade based on these market-moving indicators . data. Do your research and stay up to date with economic news and you too can reap the rewards.

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