The Dangers of Trading the News
As with any trading strategy, there are always possible dangers that you should be aware of. When news is essential news that everyone is watching, you can almost expect to see some significant movement. The fact that you know the market will most likely move somewhere makes it an opportunity worth looking at. Your goal, then, as a news trader, is to get on the correct side of the move.
Many forex brokers widen the spread because the Forex market is very volatile during important news events. This increases trading costs and could hurt your bottom line. You could also get “locked out,” meaning your trade could be executed at the right time but may not appear on your trading platform for a few minutes. This isn’t good for you because you won’t be able to make any adjustments if the trade moves against you! Imagine thinking you didn’t get triggered, so you try to enter at the market price… only to realize that your original order got triggered!
You could also experience SLIPPAGE. Slippage occurs when you wish to enter the market at a specific price, but due to the extreme volatility during these events, you get filled at a far DIFFERENT price. Big market moves by news events often don’t move in one direction. The market may usually start flying in one direction, only to be whipsawed back in the other direction. Trying to find the right direction can sometimes be a headache! Profitable as it may be, trading the news isn’t as easy as beating some toddler at Fortnite. It will take tons of practice, practice, and, you guessed it… more practice! Most importantly, it would be best if you ALWAYS had a plan in place.