Forex News Trading Systems, Do they work?


Forex News Trading Systems: Many traders and investors spend a lot of time following and analyzing news events via the major media networks CNBC, Bloomberg and through the various newsletter publications and newspapers. There is a commonly held belief that by following news events in real time it is somehow possible to gain an information and trading advantage over all the other traders and investors..who are also sat watching the same news! The problem is that when everyone chases the same news it no longer works: by the time news is released smart money has often already taken their position and will use the news event to unload, leaving short term news traders hanging high and dry.

So how does the small trader gain an informational advantage on news events?

The best way is to pay attention to price action. Price reflects all known relevant information: market action discounts everything. If a large fund or investor has information and acts on this information their action will leave a trail in the market: visible patterns of accumulation and distribution. By paying attention to price action, specifically chart formations where price action starts to move outside of an established range as in the case of momentum breakout methodologies , it is possible to build a huge operational advantage over other traders who are sat waiting for news event confirmation through the media networks. Barring ‘inside information’ this is the fastest way to take advantage of information flow in the markets.

Is there not any way to make money from Forex News Trading Systems?

Yes, but it involves taking a contrarian approach and fading the news: selling into good news (high prices) and buying into bad news (low prices). This is a mean reversion strategy and works well across multiple time frames. Successful long term contrarian investors include Warren Bufffett, Jim Rogers and Marc Faber.