Preparing for a news release
As a trader, you should always be aware of the economic indicators that will be released in the next three to five days. You should also be aware of which markets they may affect, and whether or not you have positions that may be affected.
While there are numerous news releases every day, the majority are not significant for most markets. Others, particularly major news about the US economy, can potentially have knock-on effects for every region and asset class.
One Financial Markets’ economic calendar includes all the major releases you should be aware of. The first thing to do is note the major US and European releases, and the releases relevant to the markets you are watching or have positions in.
Next, you can look at financial news sites and social media, to see what other traders have to say about an upcoming news release. If everyone seems to be in agreement, then a number in line with consensus will have very little effect but may lead to some profit-taking. If the actual number is a surprise, chances are a lot of people will be on the wrong side of the market, and a large move could follow.
If there isn’t agreement, the market is probably evenly balanced – but that could also create opportunities. After the release, buying or selling could become more dominant and give a clearer sense of direction.
You should also look at what the market is most concerned with. This could be growth, inflation, trade, or geopolitical issues. Then think about how better or worse than expected data could affect those aspects of the market.
Finally, you should consider any open positions you have and how a news release could affect it. That doesn’t mean you should close any position that could be negatively affected – but you may have a trade that’s not really working and not worth the extra risk.