As we spoke about earlier in the Fundamental analysis lesson the news is a very important factor in Forex trading, because it's the news that causes the market to move and without movement there can be no profit. Currency pairs have been known to move to about a 100 pips and even more sometimes just because of a news release and that's why some traders love to trade news events. However a lot of traders avoid news events because they can be very dangerous to trade.
Dangers of Trading the News
Because of the increase in volatility in the Forex market during major news events many brokers widen the spread, this increases the cost of trading and could hit you even harder if you were to make a loss.
Another danger is the risk of being locked out, which means that your trade could be executed at the right time but might not show up on your trading platform after a while, this is a problem because you would not be able to make adjustments to your trade if the market moves against you.
You could also fall prey to Slippage, this occurs when you attempt to enter a trade at a certain price but due to extremely high volatility, you actually get placed in at a far different price.
During a news event the market doesn't always move in one direction, it often spikes up and down which can make trading these events stressful and dangerous, and a stressed trader should not be trading. There are strategies you can put in place to combat this, look out for the strategies for trading the news in our blogs.