WHAT TO DO?
Let me ask you a question. When you are trading and you are uncertain on what to do, what do you do? Do you trade? Do you stay flat the market? Are you the type of trader who MUST have the percentages on your side while trading and therefore being in control to some extent, or, do you fly by the seat of your pants and love when the markets are crazy? There are many things that happen to us while trading that we cannot predict and we have no control over while in a trade. Like when the Fed lowers or raises interest rates with no prior warning, or when the Fed dumps 200 billion dollars into the financials with no notice. These things cannot be factored in while trading, however, other things can be. It is not wise to jump into a trade 30 seconds before the Non-Farm Payroll Report comes out. You have no idea what is going to take place. You would have more control at a blackjack table.
There are many events that, as a trader, you can and should avoid. For example, it is useful to follow economic reports, right? If you know when these reports come out, you can consider how the outcomes of these reports may impact the trades you are in or looking to get in. The PPI, GDP, Non-Farm Payroll, the ADP report, housing, consumer spending, and many more reflects the state of the economy, and news of these reports impact the currencies. If you are a conservative trader, you want to avoid trading until you know the results of these reports, and more importantly, how the currencies react to the news.
It’s also important to monitor when the Fed makes decisions about interest rates. Any event can move prices in ways that you did not expect. How you handle these events is up to you. You can do your homework and make a trading plan, or, get caught off guard. Some conservative traders avoid trading on these days all together, while other traders with greater levels of risk tolerance actually develop trading plans to take advantage of how these events may impact prices. What you do and how you trade all depends on your personality and tolerance for risk.
Whatever you do make sure you are aware of market events that can change your trading plans. You must take full responsibility for what may happen. Remember, traders who don’t take responsibility for their decisions will not only be caught off guard, but will devote a portion of their energy defending themselves against their poor choices.
Be a smart trader and make sure you are always aware of announcements coming your way.
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Have an awesome trading day,
Forex Confidential
