Developing a news trading strategy like a pro trader
News trading is always considered a risky approach. The Forex market becomes extremely volatile during the major news release and it becomes tough to trade with tight stop loss. Even if you trade with a wide stop loss, you might lose the trade due to a false swing in the price. Professional traders rely on special techniques to deal with critical news events and follow advanced risk management techniques to protect their trading capital.
To trade the news like a pro trader, you need a professional trading strategy. Today, we are going to give you some amazing guidelines which will allow you to trade the key news event without having any major issues. Let’s get into the details of this article.
The severity of the news
The first thing you should consider is the severity of the news. Economic news releases can be divided into three major parts. These are –
- Low impact news
- Medium impact news
- High impact news
Being a full-time trader, you should have zero problems with the low and medium-impact news. Things become a bit complex as you start dealing with the high-impact news. These are the key events that hold the power to change the trend.
So, if you intend to trade during the high-impact news, you must analyze the economic data. Once the economic data is analyzed, you have to look for the sweet spot in the trading platform so that you can take the trades.
Multiple time frame analysis
Professional news traders always rely on multiple time frame analyses. Using the multiple time frame analysis is a great way to improve your trading skills. You can learn a lot about the market and easily filter out false trade signals. But make sure you give emphasize the higher time frame data while studying the different time frame signals. This will allow you to improve your trade execution process and let you trade professionally.
Always take your trades in a standard way so that you can improve your trade execution process without using complicated EAs or indicators. And never feel shy to use the premium Forex trading demo account from Rakuten. Practice in the virtual trading platform as long as you want but make sure you learn the proper way of multiple time frame analysis.
Trade with 1% risk
While developing your news trading strategy, you should always trade with 1% risk. Due to the intense volatility of the market, you can easily aim for a 1:5+ risk to reward ratio in each trade. And if the trade hit the stop loss and you experience a heavy slippage, you will lose more than 1% of the account balance but the overall risk will not exceed the 2% risk factor. But for that, you also need to trade with a professional broker.
If you trade with a low-end broker, chances are high that you will face heavy losses even after following the regular risk management policy. And always execute the trades by setting the stop-loss price as it will limit the loss.
Test your trading strategy
After learning about multiple time frame analyses and advanced risk management techniques, you should test your trading strategy in the demo account. By using the demo account, you can fix the faults in your trading system and look for better results.
Never think you can earn a big amount of money without fixing the errors in your trading strategy. To test your trading system, you can rely on the demo account. If you manage to trade the major news without having any problem, you can expect the system is ready for the real market.
News trading requires in-depth knowledge about the market. If you want to succeed as a retail trader, you must learn to take the trades in a standard way. Improve your decision-making ability by reading more books and articles. Keep on harnessing knowledge so that you can take better decisions without having any major problems.
(This article was contributed by Rakuten Securities Australia)