(whoosh) – In this video you'lllearn the top two ways for making money fromeconomic news events.
Now the first one involvestrading into the risk event.
This is basically where youbuy or sell the currency in the days before the actual release and ride the move that occurs.
The second one involvestrading out of a risk event.
Now this is where you waitfor the figure to be released and then you buy or sell the currency based on the deviation in the data.
Now the biggest factor, however, is something called market sentiment.
And if you're trying totrade economic releases without market sentiment, you're going to experiencelots of confusion, frustration and losses.
Hi, it's Arno here from Forex Source.
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Okay, so you are probably aware that news moves currencies, right? You've watched it happentime and time over again.
Now when it comes to actuallytrading the economic releases, let's say from a calendar, you end up getting stopped out or you end up watching the price go in the opposite direction than what you thought it should.
Now we know it can be very frustrating.
But we also know that whenyou apply two simple tactics you'll see way more consistencyin your news trading.
Now the first tactic we're gonna look at is known as trading into risk events.
This basically just means thatyou anticipate a price move as the economic release time gets closer.
For example, if there isan unemployment figure being released from theUnited States next week, this could provide uswith a great opportunity to trade into it.
Let's see how all of this will work.
The first key point that we need to know for trading into a risk event is we need to know whatthe expected number is and what the previous number is.
There must be either a positiveor a negative deviation from that previous reading.
For example, let's say theprevious reading came out at 5%.
We need the forecastedor the expected number to be either higher or lower than that.
Next, we need that forecasted number, this is very important, to line up with theprevailing market sentiment.
For example, if the previous number was 5% and the forecast is expectingthe next one to print at 7%, this would represent apositive expectation.
But if the market is verynegative on the currency at that time and everybody is selling it, we would not view thatrisk event as tradeable.
At least trading into it.
Despite the expected positive reading the sentiment of the market at that time would most likely 'causetraders to simply ignore that particular data point.
Now on the other hand, ifthe sentiment was positive and then we also had apositive expected figure on the horizon, it's likely that the marketwould buy the currency into that event.
Now all of this means that the currency would most likely risein price in the days leading up to that specificeconomic data release.
Now as you can imagine, this can provide us withgreat trading opportunities.
And when we have the forecast and the sentiment lined up like this, trading into risk eventscan be extremely profitable.
Now the second tactic that we can use for trading economic newsevents is trading out of them.
Now this just basicallymeans that you wait for the actual data figure to be released and then you enter based on whether yousee a very big positive or a negative deviationin that actual figure.
So let's quickly seehow this method works.
With this strategy, the keyis how the actual number deviates from that expected number.
Now we would trade out of risk events if and when the actual number deviates from the expected numberin the way that lines up with the prevailing market sentiment.
Now a simple example iswhen the market sentiment is positive and theexpected number is negative but the actual release comes out with a bigpositive surprise deviation.
For example, imagine the current sentiment is positive on the dollar and the previous number for the risk event is 5% and the markets areexpecting a 3% number.
So we know that the expectednumber is a negative deviation.
But the actual release comes out with a big positive surprise at 7% and that would be a very big deviation in line with the currentpositive market sentiment.
So any deviations, higher orlower, in line with sentiment can 'cause the price to move and obviously give us aclear trading opportunity.
However, as you might have guessed, it's not always quite that simple.
And again, like the first example, the most critical factor in all of this is the prevailing market sentiment.
That sentiment must match the deviation in order to generatea clear tradable move.
For example, if the numberprints a positive deviation but market sentiment is verynegative around the currency any reaction is likely to bemuted from that data release.
So we need that deviation to match with the prevailing sentiment.
This means that you shouldonly trade risk events when you know specifically what you are waiting for to happen.
You can then plan how you will react and how you will trade it, which of course gives you amuch clearer and higher chance of making money from these events.
Now as you probably noticed, the key to trading economic news events is not in the news itself.
But rather that prevailingmarket sentiment on that currency.
Without the context ofthe market sentiment, the news releases isvirtually meaningless.
And if you've ever tried to trade news without factoring in the sentiment, you'll know exactlywhat we're talking about and you'll know thatconfusion and frustration that it can cause.
So make sure to pay attentionto the market sentiment when you try to tradeeconomic news releases.
Guys thanks for watching.
The idea for this video came from you guys that ask us questionsabout the fundamentals in the comments section.
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We'll catch you guys in the next video.