In Day Trading the News, I discussed the popular news day trading strategy as it applies to forex (foreign exchange) online trading.
Trading the news does not just apply to currencies though. Many traders day trade during economic or news releases using stocks too, even though I like currencies better for this. Why do I prefer forex (or currencies) for day trading news?
One word…”simplicity.” A currency is like the stock of a particular country. When it comes to the stock market, a stock represents ownership for a particular company. Whereas there are tens of thousands of stocks to choose from, there are only a few major currencies available. This simplifies matters greatly when you’re going to day trade during news releases. In general, all you have to do is focus on a particular currency during each news release. You don’t have to worry about thousands of stocks.
Some of you might argue that in order to avoid having to worry about which stock to trade during news time, all you have to do is trade a stock index that represents the entire stock market (using stocks like Diamonds (DIA) or Spiders (SPY), which mimic the Dow and the S&P500 respectively). While it is true that day trading a stock index simplifies matters somewhat, I feel that it is easier to determine how the outcome of an economic statistic is going to affect the price of a country’s currency than the average value of its stock market.
So currencies still earn my vote over stocks for the online day trading of news.
