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How Does Forex News Trading Work?

The Forex market is quickly becoming one of the most popular investment vehicles because of its huge volume and liquidity. However, it is also one of the most volatile investment vehicles because of its sudden price fluctuations and the fact that most of the market is heavily leveraged. For these reasons, fortunes can be made or lost in short order making the need for a reliable investment system very urgent indeed. While many Forex investors rely upon charts that track price movements and other forms of technical analysis to help determine entry and exit points, there are some investors who like enter and exit positions based upon news releases. In theory, the smaller Forex retail traders should have a slight advantage when it comes to capitalizing on how the news affects the markets. With immediate Internet access and a never ending stream of brokers willing to execute trades at any hour of the day, small investors should be able to buy or sell a position quicker than some large conglomerate, mutual fund, or hedge fund. The market can literally adjust in minutes to relevant news releases so investors who move quickest will be able to capitalize—in theory. Of course, it does boil down to knowing what news is relevant and then to determine how that will affect the currency exchange rates. Even news from countries other than those in your currency pair can play a significant role in short term price corrections. For those wishing to trade in the Forex based upon news releases, there are 8 major currencies currently playing significant roles in the market, including:

1. U.S. Dollar(USD)

2. Euro(EUR)

3. British Pound(GBP)

4. Japanese Yen(JPY)

5. Canadian Dollar (CAN)

6. Australian Dollar(AUD)

7. Swiss Franc(CHF)

8. New Zealand Dollar(NZD) Because the USD is a backer in nearly 90% of all transactions on the Forex, the release of key economic indicators from the U.S. are always important to the currency exchange rates. These data are released at regular intervals which supposedly levels the playing field between the large and small investors. In theory, they should be able to capitalize upon short term price fluctuations caused by the release of these key indicators: 1. Interest Rate Decisions by Central Banks/Financial Policy Makers 2. GDP rates 3. Balance of trade 4. Unemployment data 5. Inflation 6. Retail sales/manufacturing output 7. Business Confidence as determined by Outlook Surveys 8. Consumer Confidence Surveys


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