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3d. How To Trade Gold Effectively On News Days? Federal Reserve (FED) News Impacts Gold Prices: K9 Investments Trading Analysis

Discover how Federal Reserve news impacts gold prices and other commodities. Learn expert trading strategies from K9 Investments Trading to navigate high-impact events for profitable opportunities. These high-impact news events include FED interest rate decisions, FOMC meetings, non-farm payroll (NFP) reports, and consumer price index (CPI) announcements.

Understanding Price Action: The Key to Trading

How FED (USD) news impacts commodities especially Gold.

Here News refer to High Impact News such as FED Interest Rates and FOMC Meeting, NFP, CPI. We can categorise three types of News in relation with Price Action.

  • News aligned with Price Action

  • News not aligned with Price Action

  • Global Events which significantly Impacts price Action (Example: Israel - Hamas War in Oct 2023)

Let me explain briefly what is Price Action?

  • Price action to put simply it is Supply and Demand. Price action represents this supply and demand of market on charts.

  • Every market involves individuals and institutions supply and demand is driven by so many factors such as commodities importance in real world, geopolitical reasons but all of them are indirectly or directly linked to human psychology and emotions such as greed, fear, etc.,

  • So, Price action inherently involves change in supply and demand during sessions, days, months and yearly.

  • Higher the time frame these fluctuations are easily noticed. So, Price rises or drops based on seasons as demand varies if there is no external influence like wars and geopolitical tensions.

  • Supply and demand leaves its footprint and it can be understood using various indicators and representation mechanism famously candle sticks and others.

  • Now that we understand price action is KING. If news is aligned with the Price Action direction then it gives significant Bullish or Bearish move.

  • If news is not aligned with Price Action initial reaction is a fakeout which goes in the direction of news. This move is to trap retail traders. Mostly this fake out move lasts for 15mins sometimes even for whole session.

  • 15mins or lower time frame fake out is dangerous as retail traders are going to get trapped with SLs being hit and its very difficult to react because of high volumes.

  • So, it's highly recommended to wait for 30mins after the news release to know respective commodities move.

  • Whatever the path it takes during news at the end it follows the price action direction not before taking liquidity of traders.

How to Use High Impact News to Catch Swing Impulse and Swing Retracement Leg Reversals

  • Gold swing reversals mostly occur during high impact news such as FED FOMC, NFP and CPI.

  • By examining price action on those day it leaves footprint such as Daily reversal candles like Hammer or Inverted Hammer.

Example for Gold If not overleveraged and lot size is based on the equity available for at least 150USD move then there are traders who simply trade using price action without stop loss.

By understanding how FED news impacts gold and other commodities, traders can better position themselves to profit from market movements while minimizing risk.

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