Economic news and fundamental factors act like the "wind power" that drives the price ship in the financial markets. But the problem for many traders is knowing what the news is but not how to use it on the chart. In this article, Coach Tommy will guide you to delve into how to analyze fundamentals and convert them into a practical trading plan.
Reading the news alone is not enough to win this game. The crucial skill is the ability to "convert news into a clear and actionable strategy." News is not just data; it's an opportunity waiting for you to interpret and build upon. This is what I will guide you through step by step.
1️⃣ Separate High-Impact News from General News
The market is full of news, but only certain types can instantly shift the price direction, such as:
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🔹 Interest Rates: Rate hikes or cuts by the Central Bank.
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🔹 Inflation Figures: Used to indicate price pressures and the direction of monetary policy.
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🔹 Non-Farm Payrolls (NFP): A key indicator of the US economy that the market closely watches.
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🔹 GDP: Reflects the overall picture of economic growth.
Personally, I prioritize "structurally impactful news" over daily news. For example, a speech from a central bank executive can instantly change the market direction.
2️⃣ Correctly Interpreting the News
A figure that comes out better than expected doesn't always mean the price will move in the same direction. We must also look at the context:
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Better than Expected + Supported by Main Trend → High probability of continuation.
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Better than Expected BUT Conflicts with Main Trend → May only be a short-term rebound (Pullback).
Example: NFP figures came out better than expected, but the Dollar was in a long-term downtrend because the Fed hinted at rate cuts. The result was that the USD briefly bounced before continuing its fall.
3️⃣ Converting News into a Trading Plan
The steps I use, starting from news analysis to defining entry/exit points, are as follows:
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Analyze the news direction: Is it positive or negative for the asset?
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Check the High Timeframe chart to verify the market's main trend.
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Wait for the entry moment on the Low Timeframe, typically after the market has "digested the news" for about 15-30 minutes.
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Define clear Entry and Exit points, along with setting a Stop Loss.
Example:
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🔹 US CPI news comes out lower than expected → USD weakens.
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🔹 The EUR/USD chart is in an uptrend and currently making a Breakout → Wait for a Retest and then Buy.
4️⃣ Don't Be a Hunter 1 Minute After the News Release
What I frequently see is that many beginners rush to enter a trade immediately when the news is announced. The result is encountering severe volatility and being hit by a Stop Loss quickly.
I choose to "wait" for the chart to settle down and for the price behavior to become clear to avoid the Noise that occurs during the initial period.
Summary: News is the driving force of the market, but utilizing it effectively requires interpretation and planning that aligns with the price structure. Don't trade merely because you "know the news," but trade because you have a "plan derived from the news."
Article by Coach Tommy, RoboAcademy
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Disclaimer: Investing is risky. Investors should study the information before making investment decisions.
