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The Art of Trading Based on Economic News: Best Practices

The first non-farm payroll report of 2023 in January drove markets higher as traders decided to recalibrate their holdings to sectors with heightened growth potential. This trader sentiment has been seen before, particularly during the Covid outbreak in February 2020 that sent the stock markets into a free fall.

Whether scheduled or sporadic, news has a pronounced impact on the financial markets. However, depending on the event, the impact duration may vary from a few hours to a few months. Remaining informed about news events is essential for traders to capitalise on the trading opportunities they offer.

3 Essentials to Trade Economic News

Be it an oil spill, a company’s earnings report or a nation’s GDP report – all news affects financial markets somewhere in the world. Trading economic news can be easier than breaking news events since the schedule of the announcements is known beforehand. 

For scheduled updates, market volatility is often visible before the announcement and can continue for some time after the release until traders digest the information. This highlights three critical steps for trading economic news events.

1 Information

Staying updated with scheduled economic events using a financial calendar is insufficient because these releases cannot be seen in isolation. Traders need to be kept updated on everyday developments across countries. While traders have access to numerous news channels, social media platforms and the internet, helping them overcome the infobesity to find the most relevant news items is essential. For example, an oil trader will want to be updated on OPEC nations’ news, while a precious metals trader needs news on the specific markets that use or produce those metals. A platform that provides specific, relevant information can be a significant differentiator for brokers.

2. Impact Analysis

Besides knowing about the latest news developments, traders must understand how they impact the markets. For instance, the US non-farm payroll can impact the global markets, while an earthquake in Chile might only impact local markets. Further, for scheduled events, it is critical to gauge the consensus expectations and the extent to which the actual report deviates from them. These factors determine market sentiment and, therefore, the direction of market movements. Traders need access to market analysis of economic events relevant to their chosen instruments to better understand how their portfolio would be affected.

3. Actionable Trading Ideas

To make the most of opportunities presented by the news update-led volatility, traders need actionable inputs for trading decisions. After understanding the area and strength of impact, traders should be able to identify viable entry and exit points. They also need to understand the associated risk factors and effective risk management measures that might be put into place.

It is almost impossible for traders to keep track of all news and analysis through diverse sources on the internet. Therefore, a brokerage must empower its clients with adequate assistance through economic calendars, real-time news feeds, social media sentiment analysis, dynamic market analysis and trading signals.

Facilitating News Trading for Your Traders

Brokerages can enable traders to trade news updates by enriching their platform with advanced analytic tools. The first step is to partner with a technology provider that can help provide analytical reports directly to their client’s inboxes via email and messaging facilities. Additionally, using a multilingual platform can help brokerages establish a global footprint. Choosing a comprehensive solution with news and social media sentiment, market analysis, and reporting solutions can enhance trader retention and engagement, driving growth for the brokerage.

Schedule a demo with Autochartist to harness the power of a multilingual global market analysis and decision support tools that inspire confident trading.