What happens to the forex market when it is exposed to the forces beyond its own threshold? XAUBOT Pro: What happens when important and high impact news are released? As a trader you need to be fully aware of the impact that such type of news events can have on the market.
The reason you need to be fully aware is that you need that information in order to make the right decisions in the market. But don’t worry if you already don’t know how to handle such information. In this article we will show you exactly how the foreign exchange market will react to the release of high impact news. We will also talk about the best trading strategies for high impact news and show you the strategies implemented by XauBot Pro.
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Forex Market’s Reaction to High Impact News
Before discussing any solutions, you need to first understand the problem at hand.
How is the forex market impacted by the release of high impact news? The way and the extent to which the foreign exchange market reacts to the release of high impact news will ultimately be tied to the type of the news that is being released.
For instance, it could be a financially related news event, such as regular announcements that are made about the performance of any given economy, such as their GDP or inflation, in addition to reports about the performance of the industrial section or their exports and imports. In addition, the high impact news can also be geopolitical news, such as the news about the start of a new conflict between two countries or more than that.
But you must remember that whatever the type of the high impact news may be, they will all invariably cause disruptions in the market. These disruptions are most readily seen in the form of irregular price movements or fluctuations – in other words, price volatility.
The reason we see price volatility in the market after or even before the release of high impact news has to do with the uncertainty that is tied to the nature of the news release. Traders or market participants are not sure about the ultimate impact of the news release on the forex market. And so the uncertainty that is caused by the high impact news will translate into price volatility in the forex market.
This is precisely why trading in the forex market before and after the release of high impact news can be tricky and downright risky. There are a lot of positions in the forex market, such as those related to scalp trading or even day trading, that are quite sensitive to even the smallest price changes. So when there is a high degree of volatility, it can be that much harder for traders to execute their positions perfectly and without sustaining unwanted losses.
So what is the verdict? Should you even trade the high impact news or should you sit it out? Read along to find out the answer.
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Best Strategies to Trade in Forex During High Impact News
Similar to any other situation in the forex market, there can be many different strategies as to how to trade the release of high impact news. But all in all we can refer to three major approach to trading such news events:
- Trading before the release of high impact news. This means the trader will attempt to make predictions about the impact of the news and therefore open position in anticipation of those changes being made. This is clearly the riskiest approach to trading high impact news. Because no matter how precise and reliable your market analysis will be, there are still chances that the outcome will vary widely from what you had already anticipated. But of course if you are right in your prediction, then you can make profits when the high impact news is released.
- Trading after the release of high impact news. This strategy is similar to the one discussed above, but with the difference that perhaps this one is less risky than the other one. The reason we believe this can be less risky is that in this method of trading high impact news, the trader will first wait for the release of the high impact news and then they will carry out analysis. So they can actually gauge the news itself and take it into consideration as to how it will impact the market subsequent to its release. This is why it is a bit safer. But still, no one can tell for sure what the aftermath of the release of a high impact news will be.
- Sitting it out altogether! Your safest bet with respect to high impact in the forex market would be to sit it out. This means you can refrain from trading before and after the release of the high impact news altogether.
Take a look: Navigating Market Volatility with Money Flow Limits in XAUBOT Pro
XauBot Pro’s Response to High Impact News
In order to react in time to the release of high impact news, you need to be aware of the release of such news in the first place. It is quite easy to miss news events in the forex market, as you will have to pay attention to so many other factors.
But of course XauBot Pro has two parameters that can help you set a limit for the automated trading tool with respect to trading before and after high impact news. With the help of these two parameters you can actually define in terms of minutes just how long XauBot Pro should refrain from trading before and after the release of high impact news.
And given the historical records of such phenomena in the forex market, it would be wise to take advantage of both of these parameters, especially after the release of high impact news, or post-high-impact news.
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Conclusion
In this article we looked at the best strategies that you can implement for trading the release of high impact news in the forex market. While there are two options for trading before and after such news events, there is a third and safer option which is to opt out of trading. And XauBot Pro has two parameters specifically for this purpose. One will instruct the EA to stop trading before high impact news and the other will do the same for after the release of such news.
