Trading News for Beginners – How to Spot and Trade News Categories

September 01, 2022 16:12

Think back to an incident in which you were surprised by some unexpected news. Whether good or bad, the news came as something out of the ordinary and caused a reaction, triggering a chain of events intended to cope with the news or adapt to new circumstances.

In short, we’re talking about change. Change is the catalyst that makes the trading and investing markets dynamic and filled with opportunities. With change comes risk and the need to research trading news in order to be up-to-date with the latest information. Being able to adapt quickly to change and stay on course towards your financial goals is a skill in itself.

Changes in trading news are what drives markets up and down.  Traders and investors adapt to new signals from financial leaders, amongst other cues. Economic developments and statistical results from the analysis sector also influence trading and investing decisions.

Some changes are completely unexpected and can shock market participants. Other changes come in the form of economic releases that are scheduled in a Forex calendar. These follow a regular monthly or quarterly pattern. Even those regularly-scheduled releases can contain market-moving surprises.

So, what are the different categories of trading news and how are they traded?

Recurring trading news

Recurring trading news appears on a periodical basis every month, quarter or year, and is a status update on the economy. Recurring news is broken down into many different sub-categories, some examples are below.

News by economic sector

An economy is like an engine and the different parts of the engine are made up of economic sectors, each of which contributes to the economy’s power and speed.

A Purchasing Manager Index (PMI) is a vital benchmark and sets the gauge for the performance in the Services and Manufacturing sectors which are immensely important to every economy. PMI surveys are released on a monthly and yearly basis for comparison’s sake and give traders insights into the strength of the economy.

Retail Sales, Consumer Spending, Durable Goods Orders and Consumer Confidence reports are another high priority. Traders should pay attention to these reports in order to understand whether the economy is growing or shrinking. These benchmarks also indicate whether consumers are comfortable spending on their daily needs and wants, or feel it’s better to save their money for a rainy day because of uncertainty about the economy.

Consumer spending has a close link to the labour market, a sector of high importance to the overall economy. The unemployment and employment rates are a key indicator for traders to understand whether the economy is strong, weak or stagnant. When jobs are plentiful, consumer spending is likely to be healthy. When unemployment is high, it’s the opposite – consumer spending drops, meaning knock-on effects on company profits.

The import and export sector is another one to watch carefully. The reports from this sector indicate the health of trading relations with other nations and the strength of the national currency. When the national currency is weak, other national currencies have stronger buying power because of the corresponding exchange rate, and exports rise. Foreign and domestic currency flows are essential to an economy’s health as they feed cash into the manufacturing, services and financial sectors.

The housing and construction sector ties in closely with confidence in the economy and the reports from this sector are snapshots with other sectors in the background: cement factories in the manufacturing sector; lumber yards in the timber market; and all the other raw materials needed for constructing houses and other buildings.

Last but not least on our short list of important economic sectors is Tourism and Travel. If you’re in any doubt about this, consider that in 2019 just before the COVID-19 pandemic, tourism and travel accounted for 9 trillion USD of global GDP, around 10 percent in total. In 2021, this fell to 5.8 billion USD amid travel restrictions, a considerable drop in revenue and profits for tourist and business destinations.

Reports, surveys and statistics from any of the above sectors are likely to influence the trading markets and the value of national currencies.

GDP growth news

Gross Domestic Productivity (GDP) growth reports are the king of economic reports and influence trading decisions if there are any surprises to the upside or downside. Governments publicise GDP results on a quarterly, half-yearly and annual basis and the results can impact on the value of national currencies.

News from central banks, fiscal public sector and the financial sector

Statistics from the banking, wider financial sector and fiscal sector are indispensable metrics for understanding how well the financial system and price stability are performing. These metrics come in the form of:

  • Interest rate levels
  • Price inflation levels
  • Foreign reserves levels
  • Loan default levels
  • Borrowing and loan repayment levels
  • Sovereign debt and government debt levels

How to trade recurring news

The value of a national currency compared to other currencies sums up the state of a nation’s economy. The EUR, for example, symbolises economic performance, central bank policies and a host of complex financial processes in one number. The number changes constantly depending on the different reactions to the latest news in the trading markets.

Daily news releases can be overwhelming and for the beginner it is difficult to choose which one to trade, so Admirals’ Forex Calendar breaks down the priority levels into low, medium and high priority, each indicated by a different colour.

How to trade these news events depends on each trader’s risk tolerance, skill level and financial goals, so one way to start is to join our webinars and watch expert traders analyse recurring live market events and then practice different strategies on a Demo Account. This approach would help familiarise you with the inner workings of the Forex market.

Unexpected news

Unexpected news arrives at random and, it seems, always at inconvenient times. Unexpected news events include geopolitical events like wars, political unrest and disruptions, world health emergencies like COVID-19, and economic shocks like Brexit.

With any change, a trader has to adapt quickly to unexpected events. One of the best approaches is to learn as much as you can about managing risk.

While many ingenious traders have adapted with new ideas to unexpected events, beginners should take it step-by-step and make sure that Plan B is ready in case of volatility in the markets.

Summing up, it’s worth dedicating the time to read the news on a daily basis, check Admirals’ Forex Calendar to prepare for upcoming events, and to understand the difference between recurring and unexpected trading events.

Admirals offers a wide range of educational and analytical webinars. To meet and interact with expert traders, join our free webinars!

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.