Author Mr. Zahir.,
Dealing With Revisions When Trading The News.
One of the things that forex traders need to consider when they are trading using data releases to gauge price movements is that these releases can be, and often are, revised. The initial data figures are usually not final and revised figures are generally released at some future time. These figures can be substantially different from what was originally provided. In this case, what should you do? Dealing With Revisions When Trading The News.
It is important to keep in mind that these revisions are released without any fanfare, and thus, the majority of traders may not be aware of them. This does not mean that these revisions have no effects on the market but that they may be more muted. You also have to look at the effect of the revisions on the current data.
To illustrate, let’s say that you are waiting on non-farm payroll employment data for March in order to make a trade on the US dollar. The general consensus is that March figures will show that some 40,000 jobs were lost during the reporting period. In the previous month, a decrease of 35,000 was reported. Dealing With Revisions When Trading The News.
However, when the NFP is released, it is much better than anticipated since only 20,000 jobs were lost. In addition, revised figures for the previous month showed that the decrease was only 15,000. This means that, although jobs were still lost, they were less than anticipated and the employment picture is better than expected. This may result in the dollar strengthening since this is an indicator that the economy could be improving.
Thus, when you are looking at the economic calendar, it is important that you note not just the main releases but any scheduled revisions as well. Look at both in order to get a more accurate picture of what the figures indicate and consider their effect on the overall economy. And as with regular releases, you should also look at the size of the revision. The bigger the revision, whether upwards or downwards, the heavier the effect it will have on the overall economic picture the indicator is painting.
Finally, you should also take market sentiment into account. While revisions may not grab headlines the way initial releases can, they still serve to illuminate how the economy is doing and thus, will affect the markets.