Is trading on economic news releases with the forex market a good idea?
Question:
Answer:
It works - if you have a system.
Sure it is volatile. But that's one ingredient you do need in a market if you are trading for quick profits.
One simple technique is to examine the news release predictions, make your own mind up, make a decision of how it will affect the price and just enter the market with a close stop loss.
If you get stopped out when the data is against you, then you live to trade another day. If you don't, well that means the trade went for you and you made some moolah...
Good Luck!
forex is the most volatile market, its very unstable, you should `all` day long (if the position is open) sit near PC and watch how its moving. From my own experience i dont like it, but some people do.To check by yourself you can easily open a demo account and see
Its not a bad idea. However it is very difficult. In Forex there is no standardizing organization so sometimes economic data is released to large investment banks before it is released to the public. This information leak can cause you to miss those small pip movements due to economic data releases. Also just as a side note, do not try and trade forex without an incredibly fast internet connection. With the volatility in the forex market speed is one of the most valuable resouces there is.
My dissertation advisor is an expert on FX. He once told me about a paper where the authors tested all the models that predict FX movements based on macroeconomic events. He compared them to a random walk. The random walk did better.
In other words, if you trade FX based on economic news releases and I trade based on flipping a coin, it is likely that I will do better than you do.
The one variable that had real predictive power is order flow. If you could see who was initiating FX trades, then you can predict where they will go. Unfortunately, the only people who have access to that information are institutional traders.
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