Fatal Trading Mistake – Trade ahead the news

Do you want to know more about how to avoid a common fatal trading mistake? Watch our latest video and learn to avoid to trade ahead the news.

Fatal Trading Mistake – Avoid the mistake of trading ahead the news

At one point or another, all traders will make this mistake. By not paying attention to the news flow, you can find yourself on the wrong side of announcements very quickly. In a leveraged market like Forex, this could be absolutely fatal to your account. This is because liquidity dries up, as most large traders will step away from the market until they get clarity. There is a plethora of potential announcements, but luckily there are good calendars online that can tell us which ones can move the markets the most.

In this example, I’m using the Forex Factory website calendar, but there are others that are just as useful. You can see that some of the announcements are color-coded with red, making them a high-level event. On a site such as Investing.com, they may use a star system. Either way, this gives you an idea as to how important an announcement can be, and when to be careful getting into the market. This is because you may have a sudden whipsaw with pricing, and if you are not expecting it, you can find yourself in a bad trade almost immediately.

Looking at the EUR/USD pair, you can see that we ended up going higher initially after the Nonfarm Payroll Announcement for the month of October, but turned around to fall rather drastically. Imagine being overleveraged in a position and putting it on just a few minutes before this announcement. It doesn’t take much in the way of imagination to realize how quickly your account could go from positive to negative, and how stressful trading ahead of this announcement could be. There was a time when traders would use announcements to get involved in the market, but those days are long gone.

It’s not necessarily that you should close positions ahead of announcements, but you should at least take precautions to protect your account. The first precaution that you should take is always make sure that there isn’t some kind of major announcement coming out right after you put money to work.