News straddling strategy depends on the use of a stop-limit order. A stop-limit order is basically an order that becomes a limit order once the currency reaches the designated stop price. At the specific price the stop-limit order becomes a limit order. The stop-limit order will instruct the broker to buy or sell at the specific price only when the specified stop price has been reached.
You should know the problem of slippage and how to avoid it if you want to successfully trade the news. Slippage occurs when the price you intend to enter or exit the market is different from your actual transacted price. Currency prices tend to move very fast during highly volatile market conditions. The risk of slippage is usually very high when trading the news.
Major short term currency moves are almost always preceded by changes in fundamental views influenced by the news. Traders around the world make a living by processing and translating information into money. The forex market is extremely sensitive to the flow of news related to it.
The US Dollar Index is traded on the New York Board of Trade at Finex and at the Chicago Mercantile Exchange (CME). The US Dollar Index is used by traders to get the big picture of the overall trend of the dollar. It is widely quoted in the press and on quote services.
Almost every forex broker offers a free practice account to new clients. All you need to do is to sign up with any good forex broker. The best way for new traders to get a handle on what forex trading is all about is to open a practice account.
Rollovers represent the intersection of interest rate markets and forex markets. When an open position from one value date or settlement date is rolled over to the next value date or settlement date, this is known as Rollover in currency trading. Rollovers are unique to the currency markets.
Trading is not investing. Trading is speculating. Trading can be challenging. Speculating is defined as taking business risk in the hope of profiting from market fluctuations. Successful speculating requires predicting outcomes and analyzing different market situations. It also requires putting your money on the side of the trade on which you think the market is going to go up or down.
Stop Loss Orders: Stop loss orders are critical to your trading survival. The traditional stop loss order does just that. It stops losses by closing out an open position that is losing money. Stop loss orders are used to limit losses if the market moves against your position. If you dont use stop loss orders, you are leaving yourself at the mercy of the markets. A dangerous proposition!
Currency traders use market orders to catch market movements when they are not in front of their screens. Just to remind you that forex markets are open 24 hours a day, five days a week. A market move is just likely to happen while you are asleep or in the shower as while you are sitting in front of your computer screen.
Cross currency pairs are as important as the major currency pairs that involve USD on either side of the transaction. The most active traded crosses focus on the three non USD currencies namely EUR, GBP and JPY. These crosses are known as the euro crosses, sterling crosses and the yen crosses. The most actively traded cross currency pairs are: EUR/GBP, EUR/JPY, GBP/JPY, AUD/JPY, EUR/CHF, and NZD/JPY. Sometimes you will find more action in the cross currency pairs. Crosses enable currency traders to directly target trades to specific individual currencies to take advantage of news or events.