Over the past few years, retail forex traders have moved from the fringe to occupy a central position within the trading community.
In fact, most times, when people talk about Forex traders, the image of the retail trader— with his laptop — readily comes to mind. The popularity of this segment of traders has led to the proliferation of online news portals aimed at serving their needs.
However, it is crucial to ask: are those online news portals really helpful to them?
Do they contribute to the profitability of those traders in any substantial way?
Should their use be encouraged or not?
We have provided answers to these questions, and we hope they will help you to make better trading decisions henceforth.
Forex news helps you stay abreast of high-impact market developments
In financial markets, if news articles are not important for any reason, they are important because they can keep you aware of the latest developments in the market. There are high-impact news reports that traders respond to, make decisions on, and thereby influence the market with. As a result, the effects of news on the market, in no small measure, cannot be denied.
The latest market developments that you get to know of via news will help you to know the right decisions to take at each time of the trading day or worst still if you should stay away. In fact, in situations of high-impact economic events, it is highly recommended that you stay away from the market because of the high volatility that usually ensues.
However, that, it seems, is how far the usefulness of news goes for the Forex trader. Apart from this benefit that news offers, it has been observed that paying attention to the multiple online news sources might lead to bad performance nevertheless. Here is how.
Financial news can be confusing
It is a free age. Now, anyone can take to social media and blogs to post their opinions about things, with little to no check or verification. While this has completely democratized the provision of news and succeeded in making reports readily available, it has also come with its downsides.
One of those disadvantages is the tendency of these multiple news sources to be confusing. If you are subscribed to many of them, you might notice that their analyses can contradict, leaving you in the limbo. In addition to this, the veracity of the analyses of those news, in many instances, cannot be ascertained.
As a result, if you are a newbie trader especially, you have to be extremely cautious. Since you are yet to learn the ropes of the trade, it is easy to nibble on junky information that may not be useful in the long run. You might also be inclined to accept well-strung posts and recommendations hook, line, and sinker, even when they could be wrong.
Consequently, following them can spell doom for your trading. And if care is not taken, it can lead to more losses than wins. If you want to avert the negative consequences of that, it would be helpful if you can just pick a handful of reliable, well-quoted, and authority blogs and websites to use as your guide.
This way, the following financial news, would be less confusing, and you would be sure that the sources you use to make your trading decisions are adequately reliable.
Financial news is not exclusive
There is a school of thought which postulates that following financial news is invariably useless. Some members of this group have a modified opinion of that, which goes thus: paying attention to financial news does not confer any edge since those news reports are available to every trader anyway. As a result, this category of traders sees the following financial news as a wild goose chase.
But that is not completely true.
Why? Because even though virtually every market participant has access to the same set of news to maintain a level playground among traders, how people process and utilize information, however, differs. Yes, absolute reliance on financial news in trading might not be very useful but if you aim to screen through the torrent of information available to everyone and are able to identify unique opportunities to explore, you could end up being better off. If you do not want financial news to cost you your money, this should be your aim.
Guard and guide your emotions. That is, do not get too emotional over the news
The two most predominant emotions in financial markets are greed and fear. Unfortunately, financial news can unwittingly help to fuel both. Usually, they can be triggers for those negative emotions in traders and lead them to make irrational decisions.
For example, a news source can report a negative event about a particular currency. The report can lead to a massive sell-off of the currency and before you know it, you too can be caught on the web. However, before you get to join in the fray, it can be too late. Thus, you might sell at the trough of the sell-off, even when there might be a reversal soon. A similar scenario often plays out too in situations of massive buys.
This is crowd psychology. Almost every point on the chart is an indicator of it. While this is not completely bad, it can, however, be disastrous if it is taken as the ultimate determining factor in taking trades. Instead, your trades should be rooted in solid analyses and convincing reasons. Do not let emotions run your trades!
Financial news pieces are a veritable tool in trading. However, they should be prudently deployed. Besides, as a Forex trader, you must understand the basics, learn the skills, and develop yourself. Trading without the requisite knowledge and skills makes you more of a gambler and less of a trader. The more you learn, the more confident you become. And the less the chances of any financial news source messing with your head.
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