Economic news is one of the most influential factors in trading markets, including cryptocurrencies. It causes sharp and sudden fluctuations that may be an opportunity to make profits, but it can also pose significant risks. In this article, we will help you understand how to trade during economic news, and how to benefit from it safely.
Why does economic news affect the markets?
Economic news, such as unemployment reports, interest rates, or inflation data, provides direct signals about the health of the economy.
If the news is positive, the market may rise on optimism.
If the news comes out negative, markets may decline due to fear and anxiety.
Example:
If central banks announce interest rate hikes, it could lead to a decline in cryptocurrencies as investors move towards safer assets.
How to Prepare to Trade During Economic News
1. Follow the economic calendar
The economic calendar is an essential tool for traders to know when important events are due.
Identify the news that affects the market you are trading (e.g. inflation data, US Federal Reserve meeting).
Focus on High Impact Events.
Tip: Use platforms like Investing or Forexfactory to get an up-to-date economic calendar.
2. Understanding the impact of news on cryptocurrencies
Global news: such as changes in interest rates or central bank policies, greatly affects the market.
Cryptocurrency related news: such as new legislation or adoption of currencies by major companies.
Tip: Don't trade immediately after the news, as the market is very volatile. Wait until the action calms down a bit.
3. Trading Strategies During the News
A. Post-News Trading Strategy
Do not enter the trade immediately upon the news release.
Wait 10-15 minutes for the market to calm down and trends to become clear.
Use technical analysis to determine appropriate entry and exit points.
B. Breakout Strategy
Draw support and resistance levels before the announcement.
If the price breaks through these levels after the announcement, it could be a signal to enter.
C. Avoid trading “during the news live”
The market is highly volatile, which can lead to rapid losses due to price slippage.
4. Tools to help you trade during the news
Stop Loss Orders: To protect capital in case of unexpected fluctuations.
Take Profit orders: to secure profits when the target is achieved.
Limit Orders: To guarantee entry at a specified price or better.
5. Top Tips to Avoid Risks During Economic News
Do not risk more than 1-2% of your capital on a single trade.
Use a demo account to try out trading strategies during the news.
Be mentally prepared to accept high market volatility during these periods.
Trading during economic news can be a powerful tool for increasing profits, but it requires careful preparation and high discipline. By following the economic calendar, understanding the impact of news, and using thoughtful strategies, you can minimize risks and take advantage of these opportunities wisely. Always remember that risk management is the key to successful trading.