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When Is The Right Time To Buy Or Sell In The Forex Market?
As I look at my computer screen my attention is drawn to the numerous post it notes that are stuck at strategic points around its frame. Just pieces of paper with short messages to yours truly, but within is contained my whole trading strategy. Although they look innocuous, they are by their very existence everything I need to know to make money in the forex markets. So let’s have a look at the contents of one of them – trading an economic alert.
I have chosen trading the economic alert as it is the one that I have most recently scrawled upon. I have for my sins decided to rise from my slumbers early, very early for me. I have done so in order that I can participate in a trade on the Australian Dollar, US Dollar pairing. The economic alert was made at 4.30am BST, and the alert gave an opportunity to net a profit of some 70 pips in just ten minutes. Well to be completely honest the trade is still running as I write this and could continue for some time. When asking myself when is the right time to enter a trade, an economic alert ticks many of my boxes.
An economic announcement will generally have a strong effect on the Forex Market so anyone that is trading currency markets should be aware of them when preparing strategies. Many traders will make large gains immediately prior to, and post an economic announcement. Many inexperienced traders will be unaware that these announcements are what have moved the market at any given time. Economic announcements can be a pain when you are looking to get into a trade because the mere fact that an announcement is due should deter you from entering any sort of trade as the financial information that is delivered may move the market in the opposite direction to that of your trade.
Financial information that is communicated to the world will obviously have some impact, but how you treat them will have an enormous impact upon your profit and losses. If you ignore it you could find yourself in a legitimate trade which goes against you quickly, in fact very quickly. If you prepare for its arrival you could find yourself in a trade that nets you many pips. What do I do?
I never enter a trade when an economic alert is due within the hour.
If an economic alert is due, I will place a trade a minute before the alert is due on the currency pairing that I feel will be best suited to the news that is due. Generally speaking that will be a pairing that involves the US dollar if it is for example a US dollar alert. Economic alerts move markets, and sometimes they move the markets significantly. As a currency trader you need to be aware of them and place yourself in a position to benefit from them… not loose from them.
Bookmark “The Forex Factory”, find their calendar page and take a note of all the significant economic alerts that they detail. Make sure that you are not in a trade when they are announced, or at least that that trade is in profit and you have brought your stop loss up to your entry point i.e. you cannot lose money if the news sends the market against your trade.
Economic Alerts should be regarded as an opportunity rather than a hindrance, but if you do not give them the respect that they deserve they will hinder your trading and you will lose money.
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