News that is Important to Forex Trading

There is always something of interest in the news. But what about news that is important to Forex trading? Who would have thought that the news about President Ronald Reagan meeting Pope John Paul II was news that is important to Forex trading? It seemed like a ceremonial occasion but, in fact, they laid the groundwork for the demise of Russian hegemony in Eastern Europe and the dissolution of the USSR. To the extent that that meeting created modern Russia from the ashes of the USSR, it also brought Western technology to dying Russian old fields and made Russia the world’s number one oil and gas producer. News that is important to Forex trading may be disguised, as this piece of history was. Or news that is important to Forex trading may be right there on the front page. For example, politics and foreign currency trading are closely intertwined. For example, the political will of the EU to stay intact was important in helping forestall an impending Greek bankruptcy.

Daily News and Hints of the Future

In the two examples mentioned above about news that is important to Forex trading, we see that both front page items about a monetary crisis and back page news about heads of states meeting can be important to currency trading. It is usually easier to determine the meaning of more current events. However, the ability to foresee long term events and their effects of currency rates can be the most lucrative. To the extent that one chooses short term trading strategies, the front page news may be more useful. To the extent that one is interested in the long term, the later pages and editorial page opinion pieces may be better.

What Are the Options?

Forex options are commonly used to hedge Forex currency risk. But, options on Forex currency pairs are also a good way to stake out a position when a trader is not sure just when a move in the currency markets will occur. Specific news that is important to Forex trading may hit the newsstands, blogs, and social media but its full import may not be understood right away. Those who understand what is going on can often time buy options at a low price before the rest of the market catches on. This means of trading provides the trader with meaningful leverage of trading capital as well as a way to hedge risk. After all, news that is important to Forex trading may not result in market changes for months or years to come. Thus it may be better to have risked only a small portion of trading capital on an out of the money options contract than in buying directly and experiencing losses due to short term fluctuations that that have nothing to do with news that may eventually change currency values but not for some time to come. As with all Forex trading the trader needs to understand the fundamentals behind changes in currency rates and follow market sentiment which drives day to day prices.