Mastering high-impact news trading: Two essential tips [Video]

What is the market thinking?

Before a major news release, understanding market sentiment is crucial. Traders rely on tools like the Fed Watch Tool to gauge expectations. For instance, during the latest FOMC meeting, most traders anticipated no change in interest rates (holding steady at 4.25% - 4.50%), with only a small percentage expecting a 25bps cut.

Apart from trading tools, expert analysis from Wall Street strategists can provide additional insights—though they aren’t always right, they help shape the broader sentiment.

Has the market already priced it in?

One of the biggest traps traders fall into is reacting to news that the market has already accounted for. A perfect example: Leading up to the FOMC rate decision, the USD surged across major currency pairs (EUR/USD, GBP/USD, AUD/USD, NZD/USD). This suggested that traders had already factored in an unchanged rate decision. Once the official news was released, prices briefly dropped but quickly reversed back to their pre-news levels—proving that the market had anticipated the outcome.

Key trading takeaways:

• Avoid impulsive trades when news drops—volatility can spike, spreads widen, and whipsaws occur.

• Use breakout or confirmation strategies rather than chasing price movements.

• Try not to be impulsive—don’t gamble in the global markets. High-impact news events create opportunity, but only if you approach them with a plan. Stick to strategy, manage risk, and avoid emotional trades.