What’s priced in?
Many forex traders have already “priced in” consensus expectations into their trading and into the market well before the report is scheduled, let alone released.
As the name implies, “priced in” refers to traders having a view on the outcome of an event and placing bets on it before the news comes out.
The more likely a report is to shift the price, the sooner traders will price in consensus expectations.
How can you tell if this is the case with the current market?
Well, that’s a tough one.
You can’t always tell, so you have to take it upon yourself to stay on top of what the market commentary is saying and what price action is doing before a report gets released.
This will give you an idea of how much the market has priced in.
A lot can happen before a report is released, so keep your eyes and ears peeled.
Market sentiment can improve or get worse just before a release, so be aware that price can react with or against the trend.
There is always the possibility that a data report totally misses expectations, so don’t bet the farm away on the expectations of others.
When the miss occurs, you’ll be sure to see price movement occur.
Help yourself out for such an event by anticipating it (and other possible outcomes) to happen.
Play the “What if…” game.
Ask yourself, “What if A happens? What if B happens?
How will traders react or change their bets?”
You could even be more specific.
What if the report comes in under expectation by half a percent?
How many pips down will the price move?
What would need to happen with this report that could cause a 40-pip drop? Anything?
Come up with your different scenarios and be prepared to react to the market’s reaction.
Being proactive in this manner will keep you ahead of the game.
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