In the world of forex trading, there are no rules or restrictions against insider trading. Anyone who possesses information that is known only to a select few can and do trade that information in the forex market.
Information is what drives the forex markets. News is information. Timely reaction to new information can be very profitable. Publicly released news is disseminated to the various newswires. Any trader who has access to these newswire services can tap into that information and react accordingly in the forex market.
However, you must know that the institutional players do get information that retail traders dont have. Institutional players have access to the order book of their clients. They know the location of their market orders. They may also know something that others dont through their contacts in the industry.
Sometimes, the news may give an unfair advantage to the institutional players. But at other times, this isolated news access may not translate into real market action if other players dont have that information.
In other words, forex market is dependent on news. There will be negligible or little price movements in the market if there is no news. You can say the currencies move based on the technicals. Even then, these technicals have been established previously by news or expectation of future news.
The market reaction to the news is specific as it depends on both the type of medium that the news is transmitted on and the type of news that is being released. The market reaction to the news is staggered.
The online news service relay the information to the computer monitors of the traders at almost the same time as the market event occurs with no delay or a very slight delay that may be negligible. Most active traders get their information from these online market news services. So they can react almost immediately.
However, there are many other less active traders who feel they dont need real time news so they dont subscribe to these online news services. They rely on market commentaries written by analysts and published on websites or in newspapers. These traders may take time to react to the same news that may vary from a few hours to a few days to weeks. The market reaction can thus be staggered.
Part market reaction may be immediate within the first few second from those who receive real time news. Part market reaction will be more delayed reaction from those who obtain the same news hours or even days later. Some part of the reaction will be immediate while the other part will be delayed and come in a few hours to days to weeks. So staggered market reaction means that the market will react over time.
Forex economic calendar is usually packed with an average of twenty economic news releases per trading day. The market reacts differently to different news. Some news may produce little or no reaction at all.
Currency prices adjust very rapidly to the released data during times of scheduled news releases. You have to be selective to what news to focus on as the market reacts to a varying degree in relation to the type of news that is released.
Currency market reacts to what of the news rather than the why. For example, the currency prices will move as the forex market reacts to the poor than expected unemployment figures. If you are more concerned about the why of the news rather than what of the news than you should stop trading and become an analyst. The market will not have time to consider why the unemployment figures are poor this month as compared to the last month. Trading is all about taking advantage of what of the news.
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