Directional transactions

Let's return to the example of the unemployment rate in the United States. Earlier, we explained what could happen if the data is consistent with or slightly better than expected. Now, assuming there is an unexpected decline in data, what impact will it have on the US dollar? One possible trend for the US dollar is a decline. What, you're right? If the unemployment rate drops, shouldn't the US dollar rise?

There are many reasons to explain why, even if more people are employed, the US dollar may still fall.

The first reason is that the long-term and overall trend of the US economy is still in a downward trend. Remember, there are several fundamental factors that can affect the strength of the economy. Although the unemployment rate has decreased, it is still not enough to prompt traders to change their overall bearish view of the US dollar.

The second reason may be the driving force behind the decline in unemployment rate. Perhaps the decline in unemployment rate occurred just after the peak employment period during the Thanksgiving holiday. During this period, many companies usually increase recruitment to cope with a sudden increase in shoppers. The increase in employment may lead to a decrease in the unemployment rate in the short term, but this does not change the long-term prospects of the US economy.

A more accurate way to measure unemployment is to compare last year's data with this year's data. This can show you whether the job market has actually improved or not.

The important thing we need to remember is that before we make quick trading decisions, we always need to look back at the overall economic situation.

Now that you have this understanding in your mind, we will teach you how to use news for directional trading.

For simplicity, let's still use the example of unemployment rate. Before the report is released, the first thing you need to do is to take a look at the operating trend of the unemployment rate to determine whether it has been continuously increasing or decreasing. By analyzing the previous trend of the unemployment rate, you can have a rough idea of the future trend.

Assuming that the unemployment rate has been steadily increasing.6Six months ago, the unemployment rate was1%Last month, the unemployment rate rose to3%. You may say now that you are confident that the number of employed people is continuously decreasing, so the probability of unemployment rate continuing to rise is very high.

Given that you expect the unemployment rate to rise, now you can start preparing to short the US dollar. Especially, you feel like you can short the US dollar/Japanese yen.

Just before the unemployment rate report is released, at least20Minutes ago, you observed the US dollar/The trend of the Japanese yen shows that the exchange rate is fluctuating within a range. Pay attention to the high and low points of the range, as they will become breakthrough points.

Due to your expectation that the US dollar will decline/Special attention will be paid to the potential downward breakout of the yen. You expect the exchange rate to decline, so the more reasonable strategy you have adopted is to set the entry point below the bottom breakthrough line.

You may also set your stop loss at the upper breakout level and set your profit target level at the same number of points as the breakout range.

This will have an impact on your trading as you have established a bearish trading model for the US dollar, and now all you need to do is watch your trading complete.

Later, you see the US dollar/The yen has reached the target level you have set. You have already captured a lot of profits! Celebrate!

The core of conducting directional trading is that you must fully understand the information behind the news report you plan to trade. If you cannot understand the impact of the upcoming news report on a specific currency, then the trading model you have established may be very poor.