News trading is suitable for experienced professionals who know the INS and OUT of the Forex market. Being a new trader, if you intend to trade the major news, chances are high you will lose your entire investment. The professional traders are making big profits by trading the major news by following some major steps. For instance, they never take the high risk even after getting access to high leverage account. On the contrary, the naïve traders are placing big volume trades to make big profits from this market. Eventually, they blow up the trading account while trading the major news.
News trading is not all complex. To make consistent profit by trading the news, make sure you are not making these common mistakes.
Trading with negative risk to reward ratio
Many traders think to trade the major news you don’t have to use the concept of risk to reward ratio. But without following the risk to reward ratio in each trade, you are going to have a tough time to recover the loss. You may be trading the news but still, you must trade with at least 1:2 + risk to reward ratio. The professional traders are trading with a 1:6+ risk to reward ratio. If the news goes in favor of your analyzing, you are going to make a big profit. So, don’t close the trades too early. On the contrary, if the trade goes wrong, stop removing the stop loss to protect the investment. You never know how long this market will stay irrational. Cutting the losing trades early is the most effective way. And never close the profitable trades too early.
Execute the trade after the news release
A group of traders is always placing trades before the high impact news. They think this is the most effective way to make a big profit. Use the trading demo accounts and execute trades before the major news release. Most of the time you will lose trades. Without seeing the news data and placing the trades is more like gambling. And the investment industry is not for the gamblers. If you intend to make some big profit, make sure you are always trading the market with proper risk to reward ratio. Never think you can change your life without doing this basic checkup. Analyze the news data and try to correlate it with the major news. If you can do it perfectly, you can make some big profits from this market.
Trying to trade the reversal
News trading doesn’t mean you will trade the reversal. The inexperienced traders should only place a trade if the news goes in favor of the trend. Trying to trade the major reversal is a very risky process. Most of the retail traders lose money due to this approach. If you start trading with the major trend, you will be able to trade the market with less stress. Most importantly you will not face heavy spikes in the price charts. Stick to the major trend unless you are well versed with the reversal trading strategy.
Trade with minimum risk
As a conservative trader, you can trade the market with a 3-4% risk in each trade. But when it comes to news trading strategy, you can’t afford to risk more than 1% of your account balance. Trading with high risk increases the stress and forces you to close the trades early. Being a news trader, you must educate yourself with the advanced knowledge of risk management. By doing so you will be able to protect your investment from extreme volatility. Though this is a very tough task once you get the idea of protecting your capital with a low-risk trading strategy, news trading can be one of the easiest ways to make big profits.