Friday, March 27, 2015

Staying alert for news and data developments

If your trade rationale is reliant on certain data or event
expectations, you need to be especially alert for upcoming
reports on those themes.
Part of your calculus to go short EUR/USD, for instance, may
be based on the view that Eurozone inflation pressures are
receding, suggesting lower Eurozone interest rates ahead. If
the next day’s Eurozone consumer price index (CPI) report
confirms your view, the fundamental basis for maintaining the
strategy is reinforced. You may then consider whether to
increase your take-profit objective depending on the market’s
reaction. By the same token, if the CPI report comes out unexpectedly
high, the fundamental basis for your trade is seriously
undermined and serves as a clue to exit the trade
earlier than you originally planned.
Every trade strategy needs to take into account upcoming
news and data events before the position is opened. Ideally,
you should be aware of all data reports and news events
scheduled to occur during the anticipated time horizon of
your trade strategy. You should also have a good understanding
of what the market is expecting in terms of event outcomes
to anticipate how the market is likely to react.

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