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Forex Market Myths VIII - You Can Trade the News

February 25, 2012 | Comments: 0 | Views: 156

Rookie and experienced traders are always looking for the advantage that will give them an edge over other investors. Some people think they can trade the news with profit. This was true in the past; but I believe the reality changed. Here are some points I would like you to consider.

1.- Improvements in telecommunications.

In the past, news used to take a lot of time to reach the general public; and some traders benefited from this. Today news get out very fast, and the market absorbs their impact almost instantly.

2.- You can't predict with 100% certainty how the market will react.

Although it is true that the news influence the market. There is no way to know with 100% certainty how the market will react to them. What direction will it take, and for how long.

3.- It takes time to see the whole picture.

One day worth of news may not be enough to paint the whole picture. When you gather enough information, from several moths or weeks, you will have a better understanding of the market.

4.- When its news its old news.

You should realize that all the possible outcomes, of the news' impact, have been contemplated by several traders, some with a lot more resources than you. When the news reaches you, no matter how fast, it may be too late for taking any profitable action.

5.- During high volatility periods spreads grow.

On periods of high volatility, such as news releases, most brokers widen their spreads making it very difficult for anyone to make any profit.

6.- Negative risk-reward ratio.

You have to risk a lot of your money just to make a little profit. From a purely financial point of view, it' not worth it. Profiting from the news is a short term opportunity, unless you profit very fast the odds are against you.

Because of the wider spreads, there is a big chance that you will hit your stop-loss point; so even if you were right about the news impact on the market you won't be able to profit form it.

I know trading the forex market can be a rewarding occupation; you need no special skills or natural talents to become a successful trader. You just need the right education, the discipline and commitment to learn. Find a good system that operates in a mechanical way and study it. I hope this was helpful information.

Luis García - About the Author: Luis Garcia studied economics at Universidad Iberoamericana in Mexico City and has been involved in trading since 1998. Determined to see that beginners succeed and to help discouraged traders gain back their confidence, he developed the Shortcut Forex System at http://www.shortcutforexsystem.com and http://www.howtoinvestforprofit.com.

Source: EzineArticles
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