News Trading – Why Trade the News?
Why do we trade the news? The simple answer is: "To capture greater profits!"
But more rigorously, as discussed in our previous lesson, news is a critical component of the market because it has the potential to drive significant price movements.
When major news is released, nearly everyone is watching, and heightened market volatility naturally follows. As a forex trader, your goal is to align yourself with the dominant market move.
The Risks of News Trading
Like any trading strategy, news trading carries substantial risks—ones you must take seriously.
Here are the key risks involved:
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Widened Spreads: During high-impact news events, some brokers significantly increase spreads, raising trading costs and potentially harming your account.
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Execution Delays: Your trade may fill, but price updates on your platform could lag by minutes—a severe disadvantage if the market moves against you.
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Duplicate Entries: You might assume a pending order wasn’t triggered and enter manually, only to realize the initial order executed. Now your risk is doubled!
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Slippage: Your fill price may differ from the requested price due to rapid price gaps.
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Two-Sided Volatility: News-driven moves often lack a clear direction—price may surge one way before sharply reversing. Picking the right side is notoriously challenging.
News trading is far from "Ultraman fighting mini-monsters"—it demands extensive practice, discipline, and a robust trading plan.
In the next lesson, we’ll share actionable tips on how to trade news effectively.
