The Forex market experiences some it s most significant volatility during certain pre scheduled news announcements. It s a good time to trade if you know what you re doing. It can also be very hazardous if you don t. Here we will discuss five hazards of trading the news.

1. Larger spreads

The spread in Forex is the difference between the bid and ask price. The smaller the spread, the better it is for the trader. Most brokers will increase the spread just before the news is announced. It makes sense, if a broker wants to protect themselves, for them to do this. Traders must determine if the spike in price will be enough to cover the spread and get them into profit.

2. Slippage

Under normal circumstances, when you buy or sell a currency pair from your trading platform, you buy or sell at the currency pairs current price. It is very common, right after news is released, for traders to not get their buy or sell orders filled immediately. The order may get filled at a price much lower or higher than when the trader clicked on the buy or sell button. When this happens it is referred to as slippage. There is nothing a trader can do about slippage so, you are pretty much at the mercy of your broker.

3. Trading platform freeze up

Traders have long complained about their trading platforms freezing up during a news trade. What is the cause? Well, traders blame it on everything from their home computer, too much traffic on the platform at that time and, some will even accuse their broker of deliberately freezing them up. Whatever the reason, news traders need to be aware this could happen. And, like with slippage, you are pretty much at the mercy of your broker.

4. Price spike taking out your stop loss

As many new Forex traders attempt to trade news announcement, they realize the market sometimes will give them a good “head fake” before it reacts to the news release. This “head fake” is a sudden spike that contradicts the news. For instance, let s say the US non farm payroll is released and the numbers indicate the price of the USD should increase against the Euro. Right before or just as the news is released, there is a sudden spike up in the currency pair, while the released numbers say the price should go down. Many traders would have had a sell order in place with a stop loss in place. This sudden spike stops out many of those traders.

5. Listening to pre news release predictions from so called “experts”

Be careful who you listen to when it comes to pre news release predictions. You can get free Forex trading advice all over the internet. There are websites and message boards full of “experts”. Not that all are wrong, because some are very knowledgeable and can give good advice but, most real experts are not hanging out on message boards telling everyone else how to trade the news. Like anything else, you get what you pay for.

Find a good news trading system and stick with it. When done properly, trading the news can be very satisfying.

JC Marshall is a Forex trader and writer for www.myforexfuture.com.

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