In this era where information can be an extremely powerful and strategic asset, whether to individuals or firms, and information means money, for a investor, shutting yourself off from news can be suicidal. The forex market is extremely sensitive to the flow of news that is related to it, and major short-term currency moves have been preceded by changes in fundamental views influenced by the news. Traders around the world make a living by processing and converting information into money. Financial news services providers know how important news is to the forex market players, and charge reasonably limited for it. It is not uncommon to get hundreds of headers of news that are potentially relevant to Forex trading from any news service provider on an average trading day.
Traders, especially those who day trade the forex market, require the latest up-to-the-second news updates so as to facilitate their trading decisions which have to be made at super speed. They mostly make use of online financial newswire services such Black Cube as Dow Jones Newswires, Bloomberg and Reuters, which display the latest financial news on their computer monitors. Since the speed of news dissemination is essential to traders, many opt for these online instant news services rather than depending on daily newspapers like the Wall Street Journal or the Financial Times which carry stale news that is of little use to traders.
Exactly why news is so important to Forex trading is that all new part of information can potentially alter the trader’s awareness of the current and/or future situation relating to the outlook of certain currency twos. When people’s opinions or beliefs are changed, they tend to act on these changed awareness through selling or buying actions in the forex market. Based on the news, these traders will be preparing to cover their existing positions in order to start new positions. A trader’s action is based on the requirement that there will be a follow-through in prices when other traders see and think of the same news in the same way that he or she has, and adopt the same directional error as the investor as a result.
News is a very important prompt of short-term price movements because of the expected impact it has on other market players, and this is in a way an anticipatory reaction on the part of the investor as he or she considers that other traders will be affected by what is this great as well.
If the news happens to be bullish, say for the US dollar, traders who react the fastest will be among the first to buy the us dollar, followed soon by other traders who may react slower to the news or are waiting for certain technical criteria to be met before jumping onto the bandwagon. And there will be those who join in the buying madness at a later stage when they get hold of the delayed news in the morning newspapers or from their brokers. This progressive entry of us dollar bulls over a period of time is what maintains the upward move of the US dollar against another currency, with the USD exchange rate going higher against other stock markets. The reverse holds true for bearish news, traders will sell because they know that others will soon be selling, thus pushing the USD exchange rate down. This is based on the premiss that since other traders will be getting the same waste news, they will be also tend to be affected the same way.
Freely released news is disseminated to the various newswires. Any investor with access to these wires can take advantage of the information given out, and react accordingly in the forex market. However, institutional players do get information that retail traders don’t, as they get privy access to order book information in their pcs, and may also know something that others don’t through their personal contacts in the industry.
In the world of Forex trading, there are no rules or constraints against insider trading! Anyone who possesses information that is known just to a select few can and do trade that information in the forex market. Sometimes, such news may give an not fair advantage to these institutional players, but at other times, this singled out news access may not lead to real market action if other players do not have that information.