Sunday, May 27, 2012

The Importance of News to Forex Traders

In this era where information can be an extremely powerful and strategic asset, whether to individuals or corporations, and information equals money, especially for a trader, shutting yourself off from news can be suicidal. The Forex market is extremely sensitive to the flow of news that is related to it, and major short-term currency moves are almost always preceded by changes in fundamental views influenced by the news. Traders around the world make a living by processing and translating information into money. Financial news services providers know how important news is to the Forex market players, and charge a premium for it. It is not uncommon to get hundreds of headlines of news that are potentially relevant to Forex trading from any news service provider on an average trading day.

Traders, especially those who day trade the Forex market, require the latest up-to-the-second news updates so as to facilitate their trading decisions which have to be made at lightning speed. They mostly make use of online financial newswire services such as Dow Jones Newswires, Bloomberg and Reuters, which display the latest financial news on their computer monitors. Since the speed of news dissemination is very important to traders, many opt for these online instant news services rather than depending on daily newspapers like the Wall Street Journal or the Financial Times which carry stale news that is of little use to traders.

The main reason why news is so important to Forex trading is that each new piece of information can potentially alter the trader's perceptions of the current and/or future situation relating to the outlook of certain currency pairs. When people's opinions or beliefs are changed, they tend to act on these changed perceptions through buying or selling actions in the Forex market. Based on the news, these traders will be preparing to cover their existing positions or to initiate new positions. A trader's action is based on the expectation that there will be a follow-through in prices when other traders see and interpret the same news in a similar way that he or she has, and adopt the same directional bias as the trader as a result.

News is a very important catalyst of short-term price movements because of the expected impact it has on other market players, and this is in a way an anticipatory reaction on the part of the trader as he or she assumes that other traders will be affected by the news as well.

If the news happens to be bullish, say for the US dollar, traders who react the fastest will be among the first to buy the US dollar, followed soon by other traders who may react slower to the news or are waiting for certain technical criteria to be met before jumping onto the bandwagon. And there will be those who join in the buying frenzy at a later stage when they get hold of the delayed news in the morning newspapers or from their brokers. This progressive entry of US dollar bulls over a period of time is what sustains the upward move of the US dollar against another currency, with the USD exchange rate going higher against other currencies. The reverse is true for bearish news, traders will sell because they know that others will soon be selling, thus pushing the USD exchange rate down. This is based on the assumption that since other traders will be getting the same pieces of news, they will be also tend to be affected the same way.

Publicly released news is disseminated to the various newswires. Any trader with access to these wires can tap into the information given out, and react accordingly in the Forex market. However, institutional players do get information that retail traders don't, as they get privy access to order book information in their computer systems, and may also know something that others don't through their personal contacts in the industry.

In the world of Forex trading, there are no rules or restrictions against insider trading! Anyone who possesses information that is known only to a select few can and do trade that information in the Forex market. Sometimes, such news may give an unfair advantage to these institutional players, but at other times, this isolated news access may not translate into real market action if other players do not have that information.

Wednesday, May 16, 2012

Why The Preoccupation With Bad Financial News?

If I said to you, "aren't you sick and tired of hearing negative news", I would feed into more of the negative news as there is chance that my question could trigger a negative response. Aside from that, I wonder what it is about some people that seem to enjoy being right about some sort of pending doom and gloom.

I believe that we give the news media a bad rap and the reason I say this is because of Ian's Brown's February 26th article in The Globe And Mail - Divas of doom find their fame in pedaling the direst of fortunes to pessimistic masses - Bleak is chic as demand grows for dark oracles of blood-filled streets and 'zombie banks'.

Ian's article isn't talking about the doom and gloom of blood in the streets, civil wars, the collapse of Eastern Europe, and toppled governments coming from the news media. The bulk of the bad news in the article is coming out of the mouths of university professors.

I mentioned Ian's article to Robert Gignac, author of 'Wealth Is A State Of Mind', at dinner on Tuesday, March 3rd and Robert's response was that these purveyors of Financial Armageddon have been around for years and publish the same book every five to seven years with a different cover ... sooner or later they will be right. It's like the 36,000 DOW, sooner or later, it is going to happen as I recall someone saying in the early eighties that the DOW will never go past 3,000 points. Let's all hope that prediction does not come true today.

My interest in Ian's article is not about the doomsters and their predictions; it is about why they do it aside from the $50,000 speaking fees. There has got to be more to it than "bad news sells".

On one hand we have the oracles of bad news and in the other we have the unconscious masses.

Ian writes that we seem to enjoy hiding under the blankets, being told how bad the future looks and that it shocks us into feeling like grownups and getting real and at the very least we should stop and take a closer look at what we are afraid of. (for a day in my life of taking a closer look at what brings up the fear in me, see the following article - Do Something That Scares You! )

It is like we have to become five years old again and get slapped and then be put in a corner to take a 'time out' and beg for forgiveness.

"There is a peculiar human need to contemplate disaster," Vivian Rakoff, professor emeritus in the department of psychology at the University of Toronto says. Because there is the sense that if it gets bad enough, we can start over again".

BTW - Rakoff is not a doom and gloomer.

There seems to be a thread in writing about and reading about doom and gloom.

As I get into this I want to preface that I am only wondering about all of this and wish to shed some insight and it is not my intention to attack. I say this because I believe that I will make real whatever I attack.

The creator of the doom and gloom could be attacking the system whether the system is right or wrong because they lack fulfillment in some way shape or form and still have something to prove. They could have an unconscious negative belief of "if I can't or didn't make the system work for me then I will attack the system in an attempt to destroy it and try to make everyone else as miserable as I am". A person will get their need to prove met in a functional or a dysfunctional way, this law is non-negotiable.

The reader of the doom and gloom could be stuck in some kind of pattern that goes back to when they were five years old and sent for a time out awaiting forgiveness from the matriarch or patriarch that sent them there. Their past time out is now replaced with taking a bad news break expecting that good news will show up and that they will be forgiven for their sins.

This same pattern reminds me of what is happening with some corporations who were asleep at the wheel for the best part of the decade having to go back to the government for forgiveness in the form of a bailout.

So here we are in the process of having a financial time out waiting for the matriarch and the patriarch of the money to forgive us for our senseless ways so that we can start anew.

I believe we are in one of the most significant times in history where governments on a global scale are reinvesting in infrastructure to jump start the economy without having to experience a world war ... this experience that we are having will pass.

Wednesday, May 2, 2012

The Importance of Keeping Up With Finance News

The modern world has numerous intricacies to it compounded by the realities of globalization and rapid technological advancements. What this means is that no one can decide to remain ignorant of their environment and all that is going on around the world as this directly or in directly affects our lives. Many people have always regarded financial issues as a preserve of the financial gurus and those who specialize in finance issues. Acquiring the knowledge of financial matters, at least the general matters, is essential for everyone.

Finance news keep you abreast with developments in various critical sectors of the either the national or international economy. For instance if you may want to keep abreast with opportunities that exist for you in domains like forex trader then you need to know what is happening in line with developments of the volatile stock market and money markets. On another front you may want to know where there are affordable foreclosure properties that you can makes the most of to get yourself that dream real estate property as your residence or for investment.

Many people are getting hands on with financial matters because it does not really take an expert to get into financial trade circle and the make the most of what the industry can offer. What happens in the finance world affects your life directly it does not matter if it happens on a national scale or international locale. The fact is that the global economy in intertwined such that financial matters in the Australia economy for instance may affect the whole of the global financial landscape, which has an impact on the state of the economies, inflation, interest rate, etc. These are kinds of issues that get to affect you directly.

Keeping abreast with financial developments has been quiet a critically important aspect in the recent global economic meltdown. The global financial sector has been riddled with negative developments which cost some people huge profits from various business ventures. Keeping up with finance news helped people to stay on the look out and alert on the next move to do for instance in terms of example selling property, buying a property, getting a bank loan etc. the principle of keeping pace with financial developments is very important especially for entrepreneur who want to keep a close eye on the financial developments every second in order to position themselves for expediency and survival.