The introduction to news trading
|What’s up with news trading?|
|How to analyze news for trading|
|1. The nonfarm payroll report|
|An example of NFP report data|
|2. The unemployment rate report|
|3. The average hourly earnings report|
|4. And, finally, the participation number|
There’s an old joke “that economists are too smart for their own good but not smart for anyone else’s.” Sometimes that’s true, but not in amana’s “Learn” section.
Today, we’ll turn that joke on its head so that you can know more about news trading and get smarter about the global economy.
So, without further delay, download the amana app, and let’s dive into the news trading strategy!
What’s up with news trading?
News trading has become increasingly popular among forex traders because it offers countless opportunities and keeps them up to date.
However, not all macroeconomic news events have a similar impact.
If you’ve opened an economic calendar, you can see which news has a more significant impact on the market and what information you can easily ignore.
So, out of the hundreds of news releases, how do you know which news events you should watch?
How to invest correctly? Amateur VS Pro
invest in the EUR market, where he buys a large amount of EUR for AED, but he doesn't follow up with numbers and charts.
the EUR takes a major hit after the Ukraine war, but since he doesn't follow reports such as productions numbers and unemployment rates he suffers a great lose
invest in the EUR market, where he buys a large amount of EUR for AED, but he follows the numbers and charts of production and unemployment
he sells his EUR as soon as the war starts in exchange for USD which is far from the scenes of the war.
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How to analyze news for trading
There’s a lot of news out there that impacts the market. Let’s start with one of the most critical releases - The jobs report!
- Jobs are important. That’s why, if you’re an investor or a trader, the most important day of the month should be the first Friday of the month, AKA the day the jobs report hits the markets. So, let’s take a look at the most impactful job reports out there.
1. The nonfarm payroll report
Because it simply shows the health of the economy. That’s why the numbers in the jobs report impact foreign exchange rates, bond rates, and stock prices.
First, we have the Nonfarm Payroll (NFP) report, which shows the number of jobs created before the given month.
This report is released every first Friday of the month at 8:30 eastern time, so if you’re living in the UAE, the release will hit the news at 4:30 afternoon.
The NFP report shows the total number of paid workers in the US across all industries except for people working in agriculture (because that’s a seasonal job), the federal government, private households, and people working in NGOs.
The Bureau of Labor Statistics measures the NFP report.
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An example of NFP report data
The September jobs report for 2022 will be released at the beginning of October. It’ll show the number of net new jobs created in September, compared to August.
Let’s say the number is 350,000 in September. That means 350,000 more people were working in September than in August.
It’s that simple! If that were the case, that’d be good news for the economy, and it could increase stock prices.
A critical note to add here is that if this number comes out much higher than the previous month, this could lead to inflation.
That would NOT be good news for investors since the Federal Reserve (the Fed) would raise interest rates.
On the other hand, if the number is negative 350,000, that means that 350,000 fewer people were working in September than in August, which would be terrible news for the economy and could send stock prices down sharply.
2. The unemployment rate report
As the name suggests, the unemployment rate report shows the change in the percentage of people who could be part of the labor force but are currently unemployed.
It’s released quarterly and yearly. How is this report calculated?
The unemployment rate report is calculated by dividing the number of people unemployed by the number of people in the labor force * 100.
Typically, the number increases during a recession and decreases during an expansion.
Let’s say it goes from 3.5% to 3.7%. A higher rate would mean that the economy cannot generate enough jobs for people.
Usually, unemployment is caused by various reasons, such as high-interest rates, global recession, financial crises, or war. So, the lower the number is, the better for the economy and investors.
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3. The average hourly earnings report
This percentage shows how much people’s average hourly wages increased from the previous year.
If this number is up a lot, like 3% or more, it can be a big concern for financial markets because wage inflation will likely require the US Central Bank to raise interest rates.
4. And, finally, the participation number
The last on our list is the labor force participation rate. This report indicates the percentage of all people of working age who are actively job hunting, as well as those who are currently employed.
The rate varies over time, based on social, demographic, and economic trends, and it also differs between countries.
So for example, the participation rate in the United States rose in August 2022 to 62.4%, the highest it’s been since March.
#advice_by_amana: less unemployment = healthier economy = a more stable stock market
So, those are the most significant reports you should watch out for in the news when trading in the financial markets.
If you’d like to know more details about these numbers, you may visit the Bureau of Labor Statistics website: BLS.GOV. Thank you for joining us today, and don’t forget to download our trading app!
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Is news trading profitable?
While most trading using your sentiment is bad and unprofitable, using the market sentiment to your advantage can be extremely profitable.
The news can sway the public emotions and traders' sentiment which drives supply and demand. understanding this effect can help you determine future prices based on the news.
What is news trading in forex?
in forex trading, it's of the utmost importance to pay attention to the releases of major economic data, as well as government officials' declarations, and geopolitical events. as it all can affect the FX market positively or negatively.
What are the best news trading sites?
There are several prominent and famous news trading sites the most popular are:
- CNBC Breaking Business News.
- Bloomberg: Business News.
- Fox Business.
- The Wall Street Journal.
- SeekingAlpha Portfolio.