Forex Trading Advanced Level Course
    About Lesson

    Trade the News With a Directional Bias

    U.S. Unemployment Report showed improvement, why did the USD still weaken? let’s say the unemployment rate showed a surprising DROP. Which is a good thing since that means more people now have jobs.
    But you look at your charts and the dollar is FALLING! Overall Economic Outlook Still Poor
    The first reason could be that the long-term and overall trend of the U.S. economy is still in a downward spiral.
    Remember that there are several fundamental factors that play into an economy’s strength or weakness.
    Although the unemployment rate dropped, it might not be a big enough catalyst for the big traders to start changing their perception of the dollar.

    Positive Employment Numbers Are Temporary

    Trade the News With a Directional Bias
    Perhaps it’s right after Thanksgiving during the holiday rush. During this time, many companies normally hire seasonal employees to keep up with the influx of Christmas shoppers.
    This increase in jobs may cause a short-term drop in the unemployment rate, but it’s not at all indicative of the long-term outlook for the U.S. economy.
    A better way to get a more accurate measure of the unemployment situation would be to look at the number from last year and compare it to this year. This would allow you to see if the job market actually improved or not.
    The important thing to remember is to always take a step back and look at the overall picture before making any quick decisions.

    Trade the News With a Directional Bias

    How to Trade the News With a Directional Bias in ForexLet’s stick with our unemployment rate example to keep it simple.
    The first thing you would want to do before the report comes out is to take a look at the trend of the unemployment rate to see if it has been increasing or decreasing.
    By looking at what has been happening in the past, you can prepare yourself for what might happen in the future.
    Imagine that the unemployment rate has been steadily increasing.
    Six months ago it was at 1% and last month it topped out at 3%.

    You could now say with some confidence that jobs are decreasing and that there is a good possibility the unemployment rate will continue to rise.
    Since you are expecting the unemployment rate to rise, you can now start preparing to go short on the dollar.
    This is your directional bias.
    Particularly, you feel like you could short USD/JPY.
    Just before the unemployment rate is about to be announced, you could look at the price movement of USD/JPY at least 20 minutes prior and find the range of movement.
    Take note of the high and low that is made. This will become your breakout point.

    ????The key to having a directional bias is that you must truly understand the concepts behind the news report that you plan to trade.

    ❌If you don’t understand what effect it can have on particular currencies, then you might get caught up in some bad setups.

    The first thing to consider is which news reports to trade.

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    Earlier, we discussed the biggest moving news releases.
    Ideally, you would want to only trade those reports because there is a high probability the market will make a big move after their release.
    The next thing you should do is take a look at the range at least 20 minutes before the actual news release.
    The high of that range will be your upper breakout point, and the low of that range will be your lower breakout point.
    Note that the smaller the range is the more likely it is you will see a big move from the news report.
    The breakout points will be your entry levels.
    This is where you want to set your orders. Your stops should be placed approximately 20 pips below and above the breakout points, and your initial targets should be about the same as the range of the breakout levels.