Trading Gold Using News Trading Strategy
One of the trading strategies that can be used to trade Gold that is borrowed from currency trading is the Forex News Trading strategy and for Gold trading we can call it Gold News Trading Strategy.
Economic News reports often evoke strong moves in the currency trading market as well as Gold trading market because Gold is traded against the currency USD. These moves create a lot of opportunities for trading for the breakout traders who look to trade the short term market moves.
However, not all the economic reports are tradeable, some economic reports have more impact than others and only those that have a considerable effect on the price movement of Gold against the USD can be traded using this news trading strategy.
The Economic News Reports from USA will be used to trade when using this strategy. The news reports coming From USA can be found on the schedule Economic Calendar, This Economic Calendar is provided online by online brokers as well as other financial services providers traders can search for this Economic Calendar online.
By looking at the Economic Calendar schedule of news reports traders can find out the significance of the upcoming news reports to determine whether these news reports are worth trading or not based on the expected volatility of these news reports.
These Economic News Reports are market in terms of significance, there are three levels of significance and these are: RED, ORANGE and GREEN. The most Significant News Report is Marked RED in color, the least significant are marked in GREEN while those reports marked in ORANGE are in between.
The only economic news reports that traders should focus on when it comes to trading are those that are marked in RED and those marked in ORANGE. Traders should not trade the GREEN ones.
General Approach to News Trading Strategy
There are two general approaches that can be used when it comes to news trading XAUSUD.
These two methods are:
- Trading the Breakout Channel
- Analyzing the Economic News Reports
Trading the Breakout Channel
Gold traders will set a buy stop order sell stop order above and below the Gold price respectively. These orders w o both sides of the price so that when the Economic News Report is released one of the orders will probably be hit and if price continues moving in that particular direction because of this news report then the trader will make short term profits from this move.
However, because of the volatility caused by news reports both these orders may hit both within a short period of time which means that a trader can make a los in one of the open positions or in some cases both of these trading orders.
Analyzing the Economic News Reports
Gold traders can predict the most likely direction of XAUUSD by looking at the Economic Calendar Fields marked as Forecast and Previous.
These two figures are then compared with the Actual News Report that is released to give an idea of the likely next direction of the price move.
Because XAU is traded against the USD - XAUUSD, the only Economic News Reports that a trader will be watching out for are those reports from the USA.
These Gold traders will watch the news reports and pay close attention to the Actual news data that is reported - closely watch the economic numbers.
If the numbers released come as a surprise to the upside of the USD the traders of XAUUSD will short Gold (XAUUSD) - when traders sell XAU they will simultaneously be buying USD at the same time.
If the numbers released come as a surprise to the downside of the USD the traders of XAUUSD will buy Gold (XAUUSD) - when traders buy XAU they will simultaneously be selling USD at the same time.
Traders will also know and analyze when to trade and when not to trade based on if the Actual news reports are close to what the forecast was or not.
For these news traders the most important thing to know is that the analysis of the previous news report, the forecast and the actual news report will be used to determine whether to open a trade or not and what direction to open the trade in.
Because most traders will be positioning themselves to trade XAUUSD when these news reports are just about to be announced or shortly after the news reports have been announced, it means that these news reports will cause a lot of market volatility that will give traders a good opportunity for trading. News traders can then learn how to best position themselves and their trades when trading during these economic news reports by learning more about these two news trading methods and doing some practice on their Gold demo trading practice account.
A Gold news trader will keep a schedule of all the USA economic news reports using the Economic Calendar. This calendar contains a timetable of the schedule of when the news reports will be released as well as the previous news reports and the forecasts of these news reports. These economic calendars will keep this schedule and display it well in advance and this way a trader will be able to know when there are upcoming economic news reports.
A trader will keep this schedule before the news are released and also use the same Economic Calendar to get the news data after these reports are released, the economic calendar will also be updated in real time.
The Economic Calendar is compiled by Financial Analysts and Economist who study the fundamental reports and economies of the world. By having this Economic Calendar traders can schedule when to trade this economic data well in advance. To find a copy of the Economic Calendar traders can search online for "Forex Calendar" or "Economic Calendar" and traders will find a couple of these calendars hosted online on various online Gold and Forex broker websites or other Forex trading sites.
About Economic Calendars
An Economic Calendar will normally have three readings:
Previous Reading - This piece of the data shows the previous value or reading of a previous economic news reports. Most reports are in the form of numeric numbers or percentages.
Forecast - Forecast shows the value for the news that economic experts predict for that particular news report. This value is forecasted way before the date of the economic release. Economic and Financial Analysts will put across their forecast.
- If the forecast number is better than previous for USD, traders sell XAUUSD
- If the forecast number is worse than previous for USD , traders will buy XAUUSD
Actual News Report
This is what will determine if there will be a large price movement or none at all.
If the actual data release is same to the forecast, then there will not be much movement in the prices of Gold, this is because Gold traders anticipated this data and have already traded the news even before the actual data report was released.
If the actual news release is not the same as the forecast, this will come as a surprise to the traders, if the forecast and actual data release is not the same then, the traders will have to adjust their trades accordingly and this will cause a price reversal in the opposite direction.
If likewise the actual data reading was way better than expected, then the Gold price will continue towards its direction and gain further momentum towards that direction. Likewise if the actual news report is worse than the predicted data, the price movement will also continue in the same direction as that of before the news release and this time gain more momentum and move further towards that direction.
When the new information is announced then it has impact on the market only if it is different than expected. If the information is as expected then it has no impact on a currency because the information is already available to the public and has already been taken into account.
In order to use the fundamental analysis when analyzing news reports, you should first be able to know market indicators. Economic calendar containing all the fundamental indicators is created by economists. Economists also use this Economic calendar to predict different news reports. These predictions are provided by market analysts. This can have great impacts on the market. Gold Traders will watch out for news reports that have a great impact on the financial markets and use these reports to adjust their trades.
When are USA economic news reports released?
8:30 am - 10:00 am EST
USA Economic News Reports are released between 8:30 am - 10:00 am EST, Gold traders can schedule to follow and trade these news reports during this time of the economic news release.