Trading forex can be based on technical indicators from the charts or on pure forex news releases. Major news affairs and economic data make huge impact on currency movements and ignoring new releases sounds like a big mistake. However, a lot of traders choose not to include in their forex news analysis. Why is news trading more difficult then it sounds? What are the reasons for traders to stay away from news trading?

Forex news trader makes his trading decisions based on news releases data. Forex market is available 24 hours a day with 8 major currency pairs and over 17 derivatives. The currency movements are effected by economic news releases on a daily basis, and therefore are making it possible

¨ Interest rates

¨ Retail sales data

¨ Indications of inflation (related consumer price index or the producer price index)

¨ Unemployment data

¨ Industrial production

¨ Business sentiment surveys and performance reports

¨ Consumer confidence surveys

¨ Manufacturing sector surveys

¨ Country's trade balance (U.S. Treasuries)

Trading in forex news is attractive - sometimes you witness a currency move almost 100 pips within seconds after a major news release. At the first glance this is a perfect opportunity for easy money. News trading may sound easy, but it is not. Most forex traders consider it a "no-go" zone and choose to make their trading decisions based on technical indicators instead. The question is why is this happening? Why trading event is a big scare for most of us? Reason 1: High Volatility

During news releases market goes nuts! The price can move from 5 pips to 100 pips within seconds. Whatever price you anticipate might end up completely different during this kind of volatility. This is particularly dangerous in case of limit entry orders. News volatility creates uncertainty and even if you manage to catch the wave price movement on time, it can and it will in most cases turn the other way around and case you major money loss.

Reason two: Forex Brokers Limitations

There are forex brokers (usually the ones with fixed spreads), which stop you from limit orders and market orders right before the actual release news. Your trading platform simply does not "crash" - it freezes because the spreads are too wide and your forex broker chooses not to loose money.

Reason 3: Crazy Spreads

During news releases go wide spreads. You can easily see 3 pip spread turning into more than 10-pip spread during the event. In case your trading plan is to make up to 10 pips, you will end up in a potentially losing trade.

Not convinced that news trading are deadly? Consider a recent example:

After the release of home sales figures went cable approximately 180 points in something like 10 minutes and then jumped back down lower then it was before the sales figures came out! Short term support and resistance levels were broken to pieces within 30 minutes. Still want to trade news? No matter what you choose news regarding trading, it is important to understand both the benefits and high risks involved. News trading may not work for others, but might be just the way to trade for you. As a forex trader it is responsible Solely your responsibility to figure out your own trading methods that fit you the most.