How to Choose Currency Pairs to Trade the News.

After identifying the event to monitor, you now want to trade the currency associated with that event’s economy.

Choosing the appropriate currency pair is an important decision when “Trading the News”.

As a news trader, you are trying to achieve two things:

1. Take advantage of the short-term spike in volatility…
2. While keeping your transaction costs as low as possible

Because news can bring increased volatility in the forex market (and more trading opportunities), it is important that we trade currencies that are deeply liquid.

Currencies with deep liquidity have the tightest spreads which are what allow you to keep your transaction costs low.

Liquid currency pairs give us reassurance that our orders will be executed smoothly and without any “hiccups”.

1. EUR/USD
2. GBP/USD
3. USD/JPY
4. USD/CHF
5. USD/CAD
6. AUD/USD

Did you notice anything here?

That’s right! These are all major currency pairs!

Remember, because they have the most liquidity, major pairs usually have the tightest spreads.

Since spreads widen when news reports come out, it makes sense to stick with those pairs that have the tightest spreads, to begin with.

Now that we know which news events and currency pairs to trade, let’s take a look at some approaches to trading the news.

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