Tuesday, 18 February 2014

Understanding and Applying Market News, Data and Information: Sourcing Market Information

Any numbers of real-world forces are at work in the forex market at any given moment - economic data, interest rate decisions, and geopolitical events, to name just a few. And they all get filtered through the market’s collective consciousness and translated into price movements. 

As currency traders, we’re focused on trying to make money based on those price movements, but we’re not alone. A whole raft of participants is active in the currency market, and they’re all analyzing the same news and data, and drawing differing conclusions. To add yet another dimension, they’re making trades based on those conclusions, which is what ultimately moves currency prices.

Which brings us back to the observation: if it’s not one thing, it’s another. The “other” in this case boils down to how markets process information and there’s a lot of it. Your aims are to avoid paralysis by analysis and to absorb and understand as much as you can about what’s driving the market, all with the goal of making successful currency trades.

The jumping-off point for our discussion of market information has to be getting the market information in the first place. Institutional traders have teams of economists, analysts, and strategists providing them with up-to-the-minute observations and interpretations. Does this give them an advantage? Not necessarily. In the big picture, most of the information they’re getting is available to individual traders, but you have to make the effort to find it, read it, and understand it.

The art of boarding a moving train

Anyone who’s ever tried to jump on a moving train knows you have to start running alongside it before you reach out and try to grab hold. If you’re standing flat-footed, and you try to grab on, you’re likely to get your arm ripped off. The forex market is no different, and any trader who tries to jump in without first getting up to speed is asking for trouble.

Getting up to speed in the forex market means learning what the current themes are that are driving the market. To do that, you’re going to need to know where to find market information and how to interpret it.

But getting up to speed takes time, so don’t be in a rush to start trading based on a few hours or days of research. I recommend spending a month following the various currency pairs and familiarizing yourself with what’s going on before you consider yourself up to speed. Using a practice account at an online forex broker is a great way to get up to speed. Over the course of a month, you‘ll be exposed to a full cycle of economic data indicators and most market events, like central bank meetings, which will give you a firsthand sense of how the market behaves and adjusts to new information.

Part of the excitement of currency trading is that there’s always something going on - a train is leaving the station every few minutes. So don’t worry about missing the next train, because there's always another one right behind it.

Taking the pulse of the market

As online currency trading has grown in popularity in recent years, there’s been a proliferation of currency-specific Web sites targeted at-individual traders. I can’t possibly begin to review them all here, but you’d do well to start out with , a comprehensive site featuring diverse sources of market analysis, many from big-name institutional contributors, all for free.

When you're looking at forex research from various information sources, be mindful of who is providing the analysis. If you don’t know the identities or backgrounds of the analysts, you may be reading the work of someone with just a few months or a year of market experience - not exactly the most sophisticated insight. When in doubt, focus on the reports made available by major financial institutions.

Most online currency trading platforms also offer various types of market research and analysis, so when you’re deciding which broker you should open your account with, look at the quality (not to be confused with quantity) of its research offerings.

News sources

I tend to focus on the mainstream financial press, which provides continuous coverage of the major financial markets. Their Web sites provide frequent intraday updates that cover data releases and announcements, usually with some institutional commentary as well, so you can better understand how and why the market is reacting. In alphabetical order, my favorites are

When you’re reading a market news report, always use a critical eye. Keep in mind that what’s been reported has already, by definition, happened and that the market has already digested the information and likely adjusted prices accordingly.

When interpreting news and information always ask yourself:

  • What is the source of the information? You need to differentiate fact from opinion or rumor.
  • How old is the information? You need to gauge the timeliness of the information and the extent to which the market has already acted on it.

Real-time market news sources

The forex market moves on news quickly, and the institutional players generally have multiple live feeds from the major accredited newswires, such as Dow Jones, Bloomberg, and Reuters. Individuals can get real-time news, especially data releases, from the financial TV networks, such as Bloomberg TV, MSNBC, and CNBC.

At, they provide a real-time market commentary (known as Forex Insider) directly on their trading platform. The updates are provided by their research team and senior traders based on their years of experience trading in the interbank forex market. Forex Insider offers instant analysis of data releases and other news events, as well as short-term tactical trading considerations such as institutional buying and selling flows, currency option interest, and technical support and resistance levels. I think it’s a great insider resource for individual traders to stay on top of the market.

Economic data and event calendars

The forex market revolves around economic data and events, and you're going to need to find a reliable market calendar to see what’s coming down the road next. The best market calendars contain all the major upcoming economic releases, showing the time of the report, what the market is forecasting, and the prior report indicated.

Perhaps even more important than data reports are economic events like central bank rate-setting meetings, speeches by central bankers or finance officials, and important meetings like quarterly G7 conclaves or monthly gatherings of Eurozone finance ministers. Comments from these events frequently move the market in the short term, and if you’re not aware of them, you risk getting blindsided.

Currency forecasts

Most of the financial media are keen on institutional forecasts of where currency rates are headed, and you‘ll likely encounter a lot of one-month, quarterly, and year-ahead currency-rate forecasts in your market research. However, treat these as an indication of overall market sentiment and outlook instead of as a concrete trading recommendation. Most forecasts are heavily skewed to current circumstances and are a much better guide to what the market is thinking at the moment than to where rates will actually be in a month or a year.

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