In the Foreign Exchange Market, there are no absolute guarantees, but learning to trade Live-on-the-News (LOTN) is as close to a sure thing as you will find. This kind of Forex trading makes the most of the fundamental elements of the market.
We have established that trading the news is a fundamentally sound approach to Forex trading, that it offers the most consistently predictable results, and that it is simple to understand and implement when compared to many of the models offered by so-called investment experts today.
Now, we will focus on the tradable news sources and rank them in terms of reliability and predictability. We will also discuss the required deviations for a trader to profit in a given release, and explain how variances in the predicted numbers and the actual numbers will affect each.
The A-List
These reports are the most consistently predictable, the best of the best
| Reports for USA | Reports for UK | Reports for Canada | |||
| Dev. | Category I | Dev. | Category I | Dev. | Category I |
| +/- 50k+/- 1.5B+/- 1.5
+/- 0.4% +/- 0.2% +/- 1.5% +/- 0.7% |
NonFarm Payrolls Trade Balance ISM Manuf. GDP CPI Durable Goods Retail Sales | +/- 500M +/- 0.2% +/- 0.4% +/- 0.4% +/- 0.5% | Trade balance CPI Retail sales GDP Ind. Production | +/- 15k +/- 0.2% +/- 0.3% +/- 0.3% +/- 0.5 | Labor Change CPI Retail Sales GDP Merch. Trade |
Remember, the deviation (Dev.) for each category above is the amount of movement necessary to make a profit. Deviations can change from time to time as market trends shift.
The B-List
This category is comprised of releases that have historically provided good trade opportunities, but only when the numbers are off substantially. We do not provide deviations on these, but suggest a new investor make a habit of tracking these along with the A-List categories in order to hone your skills and learn to recognize and analyze trends. In time, you will establish your own deviation standards for the releases you trade.
| Category II – US Reports | Category II – UK Reports |
| – Personal Income and Outlays– FOMC announcement – Michigan final consumer sentiment- NAPM Chicago
– Philly fed survey – Michigan Preliminary Consumer Sentiment – FOMC Minutes – Treasury International Capital (TIC) |
– Nationwide house price index– CIPS Services PMI- Halifax House price Index
– MPC interest rate decision – PPI – RICS housing price index – MPC minutes – GFK Consumer confidence |
Market Reaction when Numbers are Higher or Lower than Expected
In this excerpt from his book, Forex expert Dustin Pass illustrates market reaction to higher/lower numbers using the PPI as an example:
The Producer Price Index (PPI) measures the rate of inflation experienced by manufacturers. The reading represents the monthly change in the average price of a fixed basket of goods and services purchased by manufacturers. Higher inflation generally leads to higher interest rates, which tend to strengthen the country’s currency. In other words, if the number comes out higher it is good for that currency. For example, the expected number for U.S. PPI is 0.5 percent and the actual number comes out 0.9 percent, which is higher than expected. That would be good for the U.S. dollar and any currency against the U.S. dollar will fall, i.e. GBP/USD, EUR/USD, etc. On the other hand, if the number comes out lower than expected the GBP/USD would go up.
Trading the News Conclusion
In the Foreign Exchange Market, there are no absolute guarantees, but learning to trade Live-on-the-News (LOTN) is as close to a sure thing as you will find. This kind of Forex trading makes the most of the fundamental elements of the market.
Visit the following link if you’d like to review Part One of this article:
Forex Market: News Trading, Part One -The methodology for predicting and trading these trends is simple and straightforward: monitor the economic calendar and trade the news.
[tags]trading the news, forex market, forex trading, tradable news sources, deviations[/tags]
