The publication of key economic national data is highly anticipated by investors as they can produce substantial price surges. Excellent examples of these types of events that are regarded by traders as of the utmost importance are: National Interest Rate Changes, US Non-Farm Payroll, US Trade Balance and US Unemployment Claims, etc.
Þ Trader Level: Intermediate
Þ Risk Level: Medium
The dates and times of all the important releases are published well in advance and are accessible to everyone. There are many online publications that provide an economic calendar such as Briefing.com.
Trading news releases can be a very lucrative activity if performed correctly. Basically, there are a number of ways of performing this task. In each case, you need to focus on those major news releases that are capable of generating large increases in volatility and, as such, provide the best opportunities of good profits.
You can improve your chances of success if you learn how to detect the consolidation phase of the currency pair just before a news release. Price tends to become more stable at these times because the market is anticipating the release. This means that price is trading within a tight range that is capped between a ceiling or upper resistance and a floor or support, as displayed on the following diagram. Traders are hoping that the event will increase volatility so that it is capable of creating a breakout with sufficient momentum to cause a price surge.
How to Trade on Major Economic News
- Identify News Release: Use the economic calendar to identify the times of a major news release.
- Identify Trading Range: Select a currency pair that is range-trading prior to the news release.
- Identify Support/Resistance Levels: Find the resistance and support levels by simply noting the highest points for resistances and the lowest values for supports, as shown on the chart above.
- Initiating Trade: Execute a 60 second CALL binary option if price surges 10 pips above the ceiling of the range. Alternatively, activate a 60 second PUT binary option if price plunges 10 pips below the floor. Both options need to be based on the same chosen currency pair.
This strategy provides good opportunities for exploiting major economic news releases for quick profit. As such events are notorious for whipsaw actions, your 60 second trades provide the optimum opportunity to secure profits before price has time to retract.