Market news is a significant driver of price movements in the financial markets. Economic data releases, central bank announcements, and political events can all have a profound impact on currency prices.
As a result, many traders look to trade around these type of events to profit from potential volatility. However, it’s important to be aware of the risks involved in trading on economic announcements and political events.
Risks of trading on news events
Volatility: economic and news events can cause significant volatility in the markets, which can lead to large price swings. This can make it difficult to execute trades at the desired price and can lead to large losses.
Gaps: these events can also cause gaps in the market, which means that the price can open at a significantly different level from where it closed previously. This can lead to losses for traders who are holding positions overnight or over a weekend.
Fakeouts: data releases can sometimes lead to ‘fakeouts’, which is when the market moves in one direction and then quickly reverses. This can surprise traders who are not expecting the reversal and can lead to losses.
Tips for trading news events
If you do decide to trade news events, there are a few things you can do to minimize the risks.
Have a plan: before the news event is released, have a plan in place for how you will trade it. This includes identifying the key levels to watch, your entry and exit points, and your risk-management strategy.
Use stop-loss and take-profit orders: stop-losses and take-profits are important risk-management tools, particularly when trading news events. Stop-loss orders may help limit your losses if the market moves against you, while take-profit orders can help lock in your profits if the market moves in your favour.
Be patient: don't rush into trades after a news event is released. Take some time to let the market settle down and then look for trading opportunities based on your plan.
Trading news events on MT4
MetaTrader 4 (MT4) provides a variety of tools for trading news events, including:
Economic calendar: the economic calendar shows upcoming news events and their estimated impact on the markets. This can help you to identify the news events that are most likely to impact the markets you’re trading. To access the economic calendar, navigate to the news tab of your terminal, ‘right-click’ and select ‘Economic Calendar’.
Newsfeed: The newsfeed provides real-time news and analysis from a variety of sources. This can help you to stay up to date on the latest market news, and understand how different news events are impacting the markets.
Charts and indicators: MT4 provides a wide range of charts and technical indicators that can be used to identify trading opportunities based on market news. We also offer an additional 30 premium add-ons, including 12 Expert Advisors and 18 indicators, free of charge.
In summary
Trading news events can be a profitable strategy, but it’s important to be aware of the risks involved. You can minimise your risk and improve your chances of being successful by using stop-loss and take-profit orders and creating and sticking to a detailed trading plan. MT4 provides a variety of tools for trading news events, including an economic calendar, newsfeed, and over 2,000 charts and indicators. These tools can help you to identify trading opportunities, stay up to date on the latest market news, and manage your risk.