Should I close my trades ahead of important news?

News and market reports can have a large impact on currencies.

Beginners often try to predict the actual number of a market report and get badly hurt after the number gets released. Once they realise that forecasting the actual number of a report is almost impossible, they begin to close their positions ahead of important market events, such as the non-farm payrolls or interest rate decisions.

Fundamentals can be broadly grouped into micro-fundamentals and macro-fundamentals. News, headlines and reports such as the aforementioned ones are micro-fundamentals that have a relatively short impact on the markets. The trend of a currency pair isn’t changed by the report itself, but rather by the collective view of a large number of market participants who may start to question the current trend.

For instance: If a country reports lower-then-expected economic growth for two consecutive quarters, investors may question the ability of the central bank to hike interest rates at the next meeting.

Trends change gradually, and if you have a longer-term approach to trading, you don’t have to close your trades ahead of scheduled news reports. However, if you’re a scalper or day trader, the increased volatility after the report can easily lead to relatively high losses.

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