Traders on the Foreign Exchange market, Forex market for short, can potentially make thousands of dollars based on the volatility and fluctuations of a country’s currency. To better themselves and have a leading advantage over other traders, some Forex traders and investors participate in a practice known as news trading. The risks are very high, but the potential gains can be worth thousands of dollars and many traders and investors use this technique.The technique of news trading is quite simple. It is the trading of foreign currency immediately before or after an important economic news announcement. After such announcements, there is a high possibility that market prices will fluctuate, either for the better or worse, depending on the announcement. For example, if the U. S. Federal Reserve announces another increase of the interest rate, many traders might invest in the U.S. dollar as it is expected that its value will appreciate. The main advantage of news trading is the potential for a country’s currency to make huge gains or losses in very little time. Within minutes of an economic announcement, a country’s currency can gain or lose one hundred points almost instantly. The potential of huge profits attracts Foreign Exchange traders and investors, however there are various risks associated with news trading.
Like any investment, there is always a risk, and news trading on the Forex market is no different. Though the potential profits are huge, the losses are also equally as large. The dangers of news trading come from the fact that a trade must be made quickly or else you are going to lose. If you are caught on the bad side of a trade, your money will be gone quicker than you can blink your eye. You will lose money so fast that there won’t even be time for you to manually close your trades, leaving you with nothing. Stop-loss orders are also potentially dangerous as there is a high probability of slippage because of the sudden price fluctuation.
Though some investors and traders might get lucky trading news, there is only a small probability that you will make a profit. Even if you are an expert news trader, you should still be very, very cautious when participating in this practice. Successful news trading depends solely on how you get your news. The most successful news traders are the ones with the fastest news feeds and those that are able to quickly place their trades immediately after an announcement has been made. Even using other forms of news trading, such as placing orders above or below the market price is still a guessing game, and those traders in the market who base their trades on guesses, won’t have much money after a short time.
For many Forex traders and investors, their trades are dictated by technical indicators and price indexes. Hours are spent researching every indicator, taking every risk into account and then making a decision based on everything they have studied. However, for a Forex news trader, none of this matter, and the only thing they take into account is economical news announcements.
News trading is possible because the Forex market is always open, unlike many financial markets. In a financial market, securities trades of certain stocks are suspended when an important company announcement is being made. These announcements are usually made after the market has closed for the day. However, because the Foreign Exchange market is open 24 hours, any economic announcement will have direct affects on the currency of that country, and maybe others as well. In the Forex market, there are eight major currencies that are traded, as well as over seventeen derivatives to be traded as well. This means that on any given day, there will always be economic announcements from any of the major traded currencies. The major trader currencies are as follows:
U.S. Dollar (USD)
Great British Pound (GBP)
Euro (EUR)
Japanese Yen (JPY)
Australian Dollar (AUD)
Swiss Franc (CHF)
Canadian Dollar (CAD)
New Zealand Dollar (NZD)
Because of the availability of each currency, currency pairs, and its derivatives, such as USD/JPY, EUR/USD, AUD/USD, as well as several others, each currency can be traded at any given time because these currencies are globally traded.
Any Forex news trader or news investor will have to have the latest most up to the moment news announcements. Even if the news announcements are only a couple of minutes old, this can have devastating effects for any trader who has risked any sum of money. Most news traders like to keep an eagle eye on any news regarding economical activity, but most importantly news dealing with interest rates changes, FOMC rate decisions, retail sales figures, inflation indicators such as the consumer price index (CPI), producer price index (PPI), unemployment figures, industrial production announcements, boost in business and consumer confidence, as well as business sentiment surveys. Manufacturing sector surveys, trade balance release details, and foreign purchases of U.S. Treasuries may also prove useful for a news trader to better make decisions regarding when or when not to trade.
However, it should be remembered that these news announcements can have ranging impacts on a country’s currency, and after an announcement, the volatility of a currency may greatly fluctuate. It is important to take advantage of news that creates movements in volatility that will last for a few minutes or even hours. Trading on the Forex market based solely on news is a difficult and sometimes dangerous practice. However, there are some indicators that can make a news trader’s job easier, such as breakout indicators (Bollinger bands, breakout of a candlestick bar, or a price bar). Research has proved that news announcements can impact a currency’s value quite severely, in some cases it can gain or lose anywhere from 33 pips to 124 pips, opening up the ideal trading opportunity looked for by news traders. If a news trader is able to act quickly enough, even the smallest news release can be turned into a potential profit of thousands of dollars. However, it is important to remember the volatility of such announcements, and although the profits seem endless, the losses can happen too.
India's biggest corporate scandal in memory threatens future foreign investment flows into Asia's third-largest economy and casts a cloud over growth in its once-booming outsourcing sector.The news sent Indian equity markets into a tailspin, with Bombay's main benchmark index tumbling 7.3pc in a firmer session for world markets and the Indian rupee fell.
Ramalinga Raju, founder and chairman of India's fourth-largest software services exporter, said in a statement that Satyam's profits had been massively inflated over recent years but no other board member was aware of the financial irregularities.
"If a company's chairman himself says they built fictitious assets, who do you believe here? This has put a question mark on the entire corporate governance system in India," said R.K. Gupta, managing director at Taurus Asset Management in New Delhi.
Mr Raju, who founded Satyam more than two decades ago and who took it public in 1991, said about $1bn (£667m) or 94pc of the cash on the company's books was fictitious.
The 54-year-old Satyam chairman came under close scrutiny last month after the company's botched attempt to buy two construction firms partly owned by its founders, which Mr Raju said on Wednesday was a final attempt to resolve the problem of the fictitious assets.
"It was like riding a tiger, not knowing how to get off without being eaten," Mr Raju, a management graduate from Ohio University, said in his letter, adding he was prepared to face up to the legal consequences.
Satyam said its managing director and co-founder B. Rama Raju, Mr Raju's brother, had also resigned. It did not give any reason for the resignation.
The company's difficulties multiplied when the World Bank, a major customer, barred Satyam from new business, citing "improper benefits" given to Bank officials.
Just three months ago, Satyam received a Golden Peacock award from a group of Indian directors for excellence in corporate governance.
"I think there is no future for this stock. This case for India is similar to what happened to Enron in the US," said Jigar Shah, senior vice-president at Kim Eng Securities.
"It will not stop at Satyam. Many more companies will come into scrutiny like that. There is a strong possibility investments in India will be affected."
Protect yr company's stock prices
Not many might have noticed, however, a couple of weeks back a 6 year old article began going about the web as breaking news about United Airlines applying for Bankruptcy, caused as much as a 75 percent drop in the airline’s stock, highlighting the impact of information processing and its effects in new media.
Just to give you a backdrop of the story,
“The steep sell-off in United’s shares came after a news service in Florida distributed an old story posted on the South Florida Sun-Sentinel Web site six years ago. The recirculated story gave the appearance that United had filed for bankruptcy protection again. In fact, the story was originally published Dec. 10, 2002, by the Chicago Tribune, marking the airline’s decision at that time to seek protection from creditors.
Moments after a headline for the story hit Bloomberg who took cue from this apparent ‘new story’, shares in United stock fell from about $12 a share to a low of $3, prompting a halt in trading of United stock.” (Source:Chicacgo Tribune)
Considering the volatile environment of the markets in general these days, such news might have irrevocable effects, in United’s case fortunately the truth came out and the stock recovered the losses later on. However, their reputation certainly might have been hampered a bit.
All this could have been avoided had they kept a track of their brand name and its mention and used the influence and reach of Social Media to thwart rumours in their bud. The best part is it wouldn’t have even consumed much time or cost anything, social media never does much anyway.
So how does one handle the flow of information on the web?
WATBlog suggests taking the following steps particularly with regards to managing news which can have a negative impact on your stock prices.
1. Connect with your investors through social networking sites:
The multiple options that most social networking sites give help in quickly reaching out to your target audience. You can create a group on Facebook or a community on Orkut specially for your investors, say ‘WATBlog Investor Community’ and reach out to your investors through your website or any other communication you already peruse. You can use the send message to members option to quickly connect with the users with messages that can be as short as 2 or 3 lines instead of the two page long PR that you need otherwise.
2. Become part of microblogging communities and track your brand mentions:
The way microblogging is catching on, it is inevitable that much like social networks which boast of over 100 million users, even services like Twitter, Pownce will have a major following. And as has often been seen lately, news spreads on these services really fast and we have seen instances of Twitter breaking news stories off late. Here is an very good read on Twitter as a news tool.
You can begin by following financial bloggers on twitter and other online journalists whose handles can be easily found through their websites and profiles. Next, start susbscribing to RSS feeds on keyterms like your brand name or stock symbol on Summize or Twitter Search as it is known now. This way you can keep yourself updated about any mention and reach out to the carriers of information. Endorse the fact that you are on twitter so that people can confirm any news about you that they have heard or want to share.
3. Subscribe to Google News Alerts and Popular Financial Blogs:
Subscribing is one of the best way to track topics online. Put in news alerts for your brand name, or the exchanges that you want to follow and you will keep getting updates. In United’s case this could have been very handy because the news wasn’t picked up immediately after Google News crawled the old page presuming (with valid reasons) to be new. The news could have been immediately blotted out had someone been tracking the brand. The same is the case with popular blogs, they have highly influential visitor base and are often looking for breaking news. Subscribing to blogs and alerts are easy as checking emails. WATBlog has in fact provided an in depth tutorial on RSS feeds and subscribing earlier.
4. Keep in Touch With Popular Forum Moderators
It wouldn’t be productively viable to monitor and be part of forum activities online, unless that is your job all the time. Hence, it would be a good idea to be in touch with forum owners or moderators to do the work for you to inform you if they see a new thread or topic about your company that is catching a lot of attention. You can then correct the information on the same platform and put an end to noise. The forum guys would be happy to assist because it also lends credibility to their own community. Even a huge network like Network18 use their Moneycontrol forum to promote and pitch their new offerrings.
5. Have a corporate blog and use it to provie complete details on the issue at hand
Numerous views and opinions have been published online on the importance of having a corporate blog and its benefits. Yet, many are still sluggish with their acceptance to these inherent benefits a communication platform like a blog provides. Nevertheless, build one if you don’t have one and use it to provide all the details about the issue at hand to your investors, customers and even employees. In the points mentioned before, given the fact that you have to reach out quickly the messages maybe short and to the point. With a blog you can go in depth and have a complete coverage of any misproduction of information for current and future reference. It will also help bury the negative news that would be floating around on the web.
If you look at the above points, most of them are not very different from a regular Online Reputation Management campaign. However, the scrutiny keeping in mind the latest developments was on the financial industry and aimed at marketers handling financial products and brand. We hope you find this information useful in extending your presence and making the most of it during time which require action online.
Also, though the tone of the post might intend a direct address to those responsible for a company’s brand to take part actively in social media, it need not quite be the case. The above mentioned activities can easily be assigned to a trainee or an intern to handle and keep track of. This will considerably save costs, time and effort on part of the organization while still being socially saavy.
