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The Importance of News to Forex Traders

In this era where information can be an extremely powerful and strategic asset, whether to individuals or corporations, and information equals money, especially for a trader, 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 are almost always preceded by changes in fundamental views influenced by the news. Traders around the world make a living by processing and translating information into money. Financial news services providers know how important news is to the Forex market players, and charge a premium for it. It is not uncommon to get hundreds of headlines 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 lightning speed. They mostly make use of online financial newswire services such as Dow Jones Newswires, Bloomberg and Reuters, which display the latest financial news on their computer monitors. Since the speed of news dissemination is very important 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.

The main reason why news is so important to Forex trading is that each new piece of information can potentially alter the trader’s perceptions of the current and/or future situation relating to the outlook of certain currency pairs. When people’s opinions or beliefs are changed, they tend to act on these changed perceptions through buying or selling actions in the Forex market. Based on the news, these traders will be preparing to cover their existing positions or to initiate new positions. A trader’s action is based on the expectation that there will be a follow-through in prices when other traders see and interpret the same news in a similar way that he or she has, and adopt the same directional bias as the trader as a result.

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