Although it can be risky, trading during big news events may lead to exciting opportunities. During key market releases, such as interest rate decisions, jobs data, or unexpected political announcements, prices can move very fast. This can create quick opportunities or risks in the financial markets. Traders who trade news events often look to capture these sharp moves.
Through MT4, traders can track market movements, manage risk, and follow a clear trading plan on the world’s most popular platform.
What is news trading?
News trading refers to when traders base their decisions on major news releases that move the market. Some news is scheduled and easy to monitor, such as central bank meetings, inflation reports, or U.S. data releases. Non—Farm Payrolls, which are important economic updates.
Other news comes unexpectedly, including natural disasters, sudden political statements, or new government policies. Both types of news can lead to sudden drops or rises in prices.
MetaTrader 4 (MT4) offers quick price quotes and analysis tools for news trading, but trading news always carries risk. It is equally important though to keep in mind that with news comes risk.
Prices can go up or down in seconds. Spreads, the difference between buy and sell prices, often widen. As a result, orders may not fill exactly where you expect. Therefore, traders need a good risk management plan and solid preparation.
Using MT4 to get ready for big news releases
Traders prepare for big news releases by checking an economic calendar to see when high-impact events are coming.
The majority of brokers using MT4 provide their own calendars. There are also many of them available online, for free. If you are ready for what’s coming, you can then choose to either trade the news events or not.
Some traders target major events, such as central bank interest-rate decisions, which usually cause the largest and most predictable reactions.
MT4’s built-in news feed in the terminal window provides headlines and updates from your broker’s news provider.
Some CFD brokers offer plug-ins or tools that display upcoming news directly on your charts. They can even send pop-up alerts. These features enable you to keep updated with events without exiting MT4.
How to trade news events
There are numerous ways that traders use to trade the news. A common method is placing two pending orders just before a news release. One is set to buy above the current price, the other to sell below it. This is also known as “straddle”.
Once the news comes out and prices move sharply, the system triggers one order and cancels the other. This approach could possibly catch a big move in either direction. However, wide spreads and slippage, where the order fills at a worse price than expected, may have a negative impact on it.
There is another approach with which you wait to trade after the release and once the first direction is clear. For example, if a central bank unexpectedly cuts rates and the currency drops, the trader might sell after a short pullback to follow the new trend. This prevents the sudden price changes that usually happen after news releases.
Traders with years of experience take the opposite side if they think that the market has overreacted. When there is a fast rise or fall in a price, traders watch for signs it might reverse. For new traders, this could be a bit risky since it needs a thorough understanding of the market and solid risk management.
How to manage risk
Irrespective of the approach you choose to use, risk management is key in your trading journey and in trading the news specifically. Therefore, prior to entering a trade, you should decide how much you can afford to lose if things don’t go your way.
With MT4, you can use stop-loss orders that will automatically close the trade at a specific price. It’s better if you set this once the trade is opened. There are also take-profit orders you can use to lock in profits.
News events can create sharp changes in prices, so a lot of traders reduce their positions’ size during such periods. Trading smaller lots equals having less impact on your trading account.
Avoiding trading all news releases is also a good idea. You can focus on those events that you clearly understand and whose market direction is clear.
Additionally, you should keep in mind that spreads often widen during news, meaning that the cost of entering a trade can be higher and your stop-loss might be reached sooner than expected. Slippage might also occur. If you are already prepared for all these, then there won’t be any unpleasant surprises.
Example of trading the news
For example, let’s say that a U.S jobs report is due at 8:30 a.m. In the morning, you start by checking your economic calendar and marking any support and resistance levels on your MT4 chart.
You wait until the release to trade because you expect strong volatility. Some time after the report, the numbers are even better than what you anticipated, and the USD starts going up sharply.
You first wait for a brief pullback and then buy the USD/EUR while having set a stop-loss below the recent low and a take-profit at a normal resistance level.
This is a straightforward way of planning your routine ahead, waiting for confirmation, controlling risk and keeping track of your trades. With this, even beginner traders can trade the news like experienced traders.
What are some common mistakes when trading the news?
A lot of new traders usually get into trades very quickly, without thinking, only to find themselves losing when prices reverse fast. Some others take on too much risk in hopes of profiting from one single event.
However, overconfidence usually leads to impulsive decisions because even if you have correctly predicted economic data, the market might do the opposite direction exactly because of traders’ expectations. So, stay patient and stick to your risk limits to avoid these traps.
Final thoughts
Trading news releases on MetaTrader 4 can provide exciting opportunities if done with caution. Live charts, fast execution and integrated tools to follow economic news more easily are all offered by the platform.
Trading the news though can make things riskier. Effective trading requires more preparation, discipline and solid risk management than it does attention to headlines.
Use MT4 tools like stop-losses to help your trade planning and try to maintain a clear focus on important events.
This way, quick news-driven market moves can become well-controlled opportunities.
Remember that there is no strategy to remove risk completely, so stay patient, practise and follow your trading plan when the market moves unexpectedly.
Disclaimer: This material is for general informational and educational purposes only and should not be considered investment advice or an investment recommendation. T4Trade is not responsible for any data provided by third parties referenced or hyperlinked in this communication.
