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Examples of News Affecting the Markets Article Source

A news feed may indicate a change in the unemployment rate. For the sake of the scenario, unemployment rates will show a positive change. Historical analysis may show that the change is not due to seasonal effects. News feeds show that buyer confidence is increasing due the decrease in unemployment rates. Reports provide a strong indication that the unemployment rate will remain low.

With this information, analysis may indicate that traders should short the USD. The algorithm may determine that the USD/JPY pair would yield the most profits. An automatic trade would be executed when the target is reached, and the trade will be on auto-pilot until completion.

The dollar could continue to fall despite reports of unemployment improvement provided from the news feed. Investors must keep in mind that multiple factors affect the movement of the United States Dollar. The unemployment rate may drop, but the overall economy may not improve. If larger investors do not change their perception of the dollar, then the dollar may continue to fall.

The big players will typically make their decisions prior to most of the retail or smaller traders. Big player decisions may affect the market in an unexpected way. If the decision is made on only information from the unemployment, the assumption will be incorrect. Non-directional bias assumes that any major news about a country will create a trading opportunity. Directional-bias trading accounts for all possible economic indicators including responses from major market players.

Article Source: http://EzineArticles.com/6755879

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