Some news like Non-Farm Employment Change are known as the high impact Forex news. It means they have a strong impact on Forex market and can make it move strongly. They create strong price fluctuations. Some traders try to get in the markets when these news get released because they need price movements and volatility to trade and make money, and, the high impact Forex news create lots of volatility sometimes. In this article, I am explaining how you can do this too, and will also explain the pros and cons of Forex news trading, and the best ways of trading Forex and making money, even when you haven’t become a professional and consistently profitable Forex trader yet. So, make sure to read the article entirely because it makes a big difference in your Forex trading journey and your success rate. It will make your life a lot easier.
What Are the High Impact Forex News?
There are tens of news and economic factors, but not all of them are able to move the markets. Only some of the news that are known as the high impact Forex news can generate reasonable volatility to enable Forex traders to take some positions and make some profit. Also please note that different countries and their currencies can have different news, although most of the news have the same name and definitions. There are tens of different economic news, but only a few of them have a high impact and can move the markets:
- Overnight Interest rate
- Employment and Unemployment
Don’t waste your time with the rest. I see that on many websites they offer a long list of news and economic factors as the news that traders can use to trade, but they are wrong. Most of their articles are written by writers not traders. They just read and rewrite some articles, and so they mislead Forex traders. For example, the economic factors below usually become introduced as the high impact Forex news, but they are not, and I have never seen that they move the Forex market during the past 14 years that I’ve been trading Forex:
- Gross Domestic Product (GDP) Growth Rate
- Consumer Price Index (CPI)
- U.S. Nonfarm Payrolls (NFP) Data
- Retail Sales
- Purchasing Managers’ Index (PMI)
- Housing Data
Don’t waste your time with the above news if you want to trade Forex based on the high impact Forex news. There are only three groups of news that can make the Forex market move:
1. Overnight interest rate
This is the strongest and the most important economic news with the highest possible impact. However, they don’t change it usually. I mean, you should not expect to have it changed every month to form a nice and strong trade setup for you. Besides, when overnight interest rate changes, it usually makes the markets move very strongly in a way that no day-trader can enter any markets after the news release. The spread goes too high and the price changes become so frequent that brokers cannot handle your orders after the news release. Therefore, day-traders cannot trade this news. However, when they change the overnight interest rate, it usually changes the markets’ directions and creates strong trends that can be continued for months. Therefore, this is a great chance for swing traders to get in the markets, even one or two days after the overnight interest rate change, and when a strong trade setup forms on the daily charts and by the daily candlesticks.
Fore example, if they increase the USD’s overnight interest rate, USD’s value will go higher because more investors will show tendency to buy USD and invest it in USA. This will create strong and continued uptrends in currency pairs like USD/CHF and USD/JPY, and downtrends in EUR/USD and GBP/USD, which is a good chance to take swing positions and make 1,000s of pips.
So overnight interest rate is a high impact Forex news for swing traders, but not for day-traders.
2. Employment and Unemployment
Different countries, especially USA have different kinds of employment and unemployment related news:
- Unemployment Rate
- Unemployment Claims
- Employment Change
- Unemployment Rate
- ADP Non-Farm Employment Change
- Non-Farm Employment Change
- Flash Employment Change q/q
The first four are important news that can make the price move in Forex market. However, the high impact one that can make the price move in a way that you can enter the markets to make some money is Non-Farm Employment Change. I have never seen that other employment and unemployment related news move the price in a way that you can get in the markets and make some money. Even if they move the markets, it won’t be reasonable and large enough that allows you to make some money after the news release. What you read here is based on the years of the experiences of real traders, not freelance article writers who rewrite everything they read on other websites. So, if you don’t want to waste your time and money, don’t focus on the news that cannot move the markets reasonably.
Besides, even with Non-Farm Employment Change, there are several things that you must know before you focus on trading this so called high impact news.
Trading the Non-Farm Employment Change News
If you want to trade this news here is what you must know:
There are two kind of “Non-Farm Employment Change” news. The first one is “ADP Non-Farm Employment Change” which is the estimated change in the number of employed people during the previous month, while the farming industry has been excluded and is not considered. This news doesn’t have a strong impact on Forex and other markets at all because it is the estimated change and is not the actual and real change and value. “ADP Non-Farm Employment Change” gets released monthly, usually during the first a few days of the month. Although it sometimes changes a lot and for example it goes from -231.2K to 338.2K, still it doesn’t move the markets because nobody pays any attention to it.
The real high impact news is “Non-Farm Employment Change” which is the actual change in the number of employed people during the previous month, while farming industry is excluded here as well. This news gets released usually a few days after ADP Non-Farm Employment Change. This is the one that has a high impact on Forex market and can make the price move strongly, if the actual value shows a significant change, compared to the previous value. So when it doesn’t change that much compared to the previous month, it doesn’t impact the markets at all.
For example, when the previous value is 336K but the new actual value becomes released as -140K, then it will have a really strong impact on the USD value. It causes the USD value to go down because when employment goes down that much, it means US economy hasn’t been doing good, and so investors will show less tendency to invest in USA and their markets, and they will convert their USD into other currencies. As a result, the USD value drops and currency pairs like EUR/USD will go up, and so you can buy EUR/USD.
Similarly, if the actual value becomes released as 287K while the previous value was -100K, then USD value will go higher.
These changes will form buy/sell trade setups on different time frames. Forex day-traders try to get in as soon as a signal forms on shorter time frames like 15min. They usually watch the charts before the news release and then they get in the markets as soon as a signal forms after the news release.
Usually, markets become so slow and move sideways before the high impact Forex news like Non-Farm Employment Change. This is a good chance for day-traders to get ready to get in the markets once the news becomes released. They can even set buy and sell pending orders above/below the sideways market’s resistance/support levels. For example, you could buy after the resistance breakout that was formed here after the news release:
What you learn here is that you must wait for a signal or trade setup to form on the charts, even when you know in advance that how the news will be released. The reason is that markets can completely take the opposite direction. Believe it or not, but I have seen it sometimes that markets take the opposite direction than what the news says. It means, there is no guarantee that markets always follow the same direction that the news shows. It is the big players of the markets that move the price by taking big positions. Sometimes they prefer to go against the news, and sometimes they don’t care what the news or economic factor say. They take positions based on the discretions and preferences of their country.
Therefore, as a day-trader and by using shorter time frames, trading the high impact Forex news is risky. Besides, you are going to have only one trade setup per month if lucky. Sometimes, even the “Non-Farm Employment Change” news cannot move the markets, for example when the actual value is close to the previous month’s value.
Above all, entering the markets, using the shorter time frames, after the news release moments is not that easy because sometimes markets become too volatile and spread goes too high. Also, the price changes becomes so frequent, and so brokers cannot execute your order where or even close to where they are set. So you may enter and exit the markets sometimes tens of pips away from where you have set the entry, stop loss and target orders.
Should You Spend Time on Trading the High Impact Forex News?
If you’ve read the above explanations, you know that the answer is no for three main reasons:
- You may have only one strong trade setup and price movement based on the news release, which is not enough to trade and grow your Forex account.
- Sometimes markets take the opposite direction, and so you can even lose money.
- Sometimes, markets become too volatile after the news release and it becomes too hard and risky to get in the markets under such a condition.
What Is the Solution?
That’s a million dollar question.
You trade Forex to make money, right? You don’t trade Forex to have challenges to break some records or to prove your abilities to others. You want to make money to grow your Forex account and have a stable and steady income. This makes lots of sense. Forex is a great opportunity to achieve financial freedom. However, it can turn into a disaster at the same time, if you don’t take the right and proper direction. You can waste lots of time, money and mental/psychological energy on Forex, without getting any good results. So don’t be after taking the directions or choosing the systems and strategies that won’t help you. According to what I explained above, trading the high impact Forex news is not the right choice for you. Trading Forex news releases is not the right way to make money consistently. You will lose a lot more than what you may gain.
Therefore, choose the right direction from the beginning and let Forex trading be one of the best events of your life, instead of a disaster:
1. If you are new to Forex and you don’t know what Forex trading is exactly, but you just heard or read somewhere that you can make money through trading the high impact Forex news, first learn what Forex is and how it works by reading these short articles:
2. Forget about trading the high impact Forex news because it won’t make money for you as you learned above. You have two options to start making money with Forex, now that you know what Forex is and you don’t want to risk your time and money on trading the high impact Forex news.
The first option is to spend time to learn how to analyze the charts, practice through demo trading, etc., according to what this article explains in detail. It takes time if you want to do it on your own, and chances are you miss the right track and never get where you want to be.
The second option is that you join a system/program that shortens your way toward becoming a consistently profitable Forex trader. I am talking about a system that not only teaches you how to trade on your own, but also it enables you to trade and earn money while you learn. You can start making money from the beginning and while you are learning to become a consistently profitable trader. This is a lot better than reinventing the wheel on your own, while you are not making any money. It is also much wiser than trading the high impact Forex news that is too risky. Follow our articles.