If you're trading for a prop firm, you'll quickly realize that time is of the essence. But then there's the one and only world of breaking news in the Forex marketplace. Either it can make you a lot of money in a split second by throwing the currency markets into chaos or it can wipe you out by causing currencies to fluctuate rapidly. This is where the economic calendar function in MT5 isn't simply an awesome addition to the software—it's literally your trader sidekick in this respect. The twist with this news-based market behavior? Different currency pairs respond in different ways. It's crucial to get it right if you're using a funded account and expect strict risk caps. Here's the lowdown.
Why News Trading Matters for Prop Traders
News trading isn’t a matter of staring at a chart all day long hoping a trend will materialize. It’s a matter of being aware of the rhythm of the market and making a play during the high points of that rhythm. Proprietary traders are always fond of news trading because of its high-probability payoff, but it’s a double-edged sword too. A single mistake during times of a large release will blow a chunk of your money instantly.
This is why I really like having access to an economic calendar such as the one available on MT5. All the important announcement events, such as NFP, CPI figures, and interest rate announcements, come directly to you in your trading software. This way, you don’t have to open other browser tabs and worry about possibly missing a breaking news announcement.
How to Choose Currency Pairs for News Trading
Pairs don’t all have the same level of “reactivity” for news. Some will barely flinch at the release of huge news, while others will rocket by several hundred pips in just a few minutes. As a prop trader, you’ll want pairs reactive enough to allow fast entry and exit points but not so liquid that the price action isn’t worth taking. Here’s how the Best Currency Pairs can be categorized:
EUR/USD
The granddaddy of FOREX pairs. The EUR/USD pair experiences incredible liquidity and usually reacts vigorously to important news events in the United States and Europe. News such as the U.S. Nonfarm Payrolls, FOMC announcements, and the GDP figure for the Euro region can cause this particular pair to soar. The liquidity in this pair ensures that the spread always remains tight, even when news breaks.
One thing to note: EUR/USD may trade erratically during off-US market hours if European news announcements are released, so timing trades for maximum session overlaps is a good idea.
USD/JPY
But if you love volatility without extreme spreads, then USD/JPY is the best friend you can get. The currency pair suddenly responds to United States economic data and Bank of Japan announcements. The economy in Japan progresses just a little bit slower than in the United States, often making it more predictable than EUR/USD when receiving mixed news. Additionally, this particular currency pair is highly liquid, so it’s easy to scale in and out, which prop firm traders are always grateful for.
GBP/USD
The ‘Cable’ is well known for its market-moving fundamentals. News surrounding the UK economy, whether it involves the growth of their GDP, their inflation levels, or interest rate decisions by the Bank of England, can cause the price of the ‘Cable’ to explode both ways. Throw in some US news, and you have a volatile price action on your hands. The key to trading the ‘Cable’ is to always expect a whipsaw market.
USD/CAD
If you want a pair that’s reactive to commodity news, USD/CAD is a solid pick. The Canadian dollar is heavily tied to oil prices, so news affecting global oil markets—think OPEC decisions or U.S. energy reports—can move this pair dramatically. Prop traders often use MT5’s calendar to track both U.S. economic data and major oil-related announcements to gauge potential USD/CAD swings.
AUD/USD & NZD/USD
Such commodity-related currencies are highly preferred for traders who favor news trading in the Asian session. Information such as employment data and exports of commodities in Australia and New Zealand can trigger volatile action. Most importantly, because of decent market liquidity in the Asian market, you don't have to wait for the London or New York session to witness volatility. Such pairs can prove quite helpful in the event of your prop firm allowing you to trade multiple sessions and spreads remaining reasonable.
Cross Rates (EUR/JPY, GBP/JPY, etc.)
After you're familiar with major crosses, you can then look at cross pairs for additional trade opportunities, although with additional risks. Crosses tend to be more volatile, as there is less market liquidity than with major currencies. Nevertheless, if you're monitoring the correlated news releases, say for the Eurozone for EUR/JPY, for instance, you could find trade opportunities that aren't immediately apparent by looking only at major currency pairs. Your secret tool for this is the MetaTrader 5 Economic Calendar.
Timing Is Everything
Picking the right pair is only half the battle. News trading is all about timing. MT5 makes this easier with countdowns to key events and real-time updates. For example, if you’re targeting the U.S. Nonfarm Payrolls, you can see exactly when the number will be released, what the consensus estimate is, and how past releases have moved the market.
Pro tip: Watch the minutes leading up to the release. Many traders try to “front-run” news, which can create fakeouts. Waiting for the initial spike to settle, then jumping in with a clear trend, often reduces slippage and keeps your risk manageable.
Using MT5 Tools to Boost Your News Trading
Aside from the economic calendar, there are features in MT5 that can be used to the advantage of prop traders:
- Alerts: Set alerts for particular news releases. This allows you to get a buzz on either the desktop or mobile device, meaning you will never be caught unaware.
- Technical Indicators: News Trading and Technical Markets. News Trading, SupportResistance Lines, Moving Averages, Bollinger Bands.
- One-Click Trading: When it comes to rapid market news, speed is key. With MT5, one-click trading enables traders to enter or exit trades with one click, without having to search for buttons.
By incorporating all these tools into your economic calendar strategy, a disorganized news release could become a planned move.
Risk Management is Key
Even with the most optimal pairs and optimized MT5 configuration, it is never possible to ensure profits. News actions occur at a rapid pace and can be merciless. This is why prop trading companies stress managing risk:
- Risk of a broker going out of business during a dispute over transaction
- Set your risk per trade: A good starting point would be risking 1–2% of a given account.
- Stop-losses can be harnessed effectively: Don’t always wing it on stop-losses. Position stops according to market volatility and the strategy that the individual follows.
- Don’t over-trade: It is tempting when several pieces of market news appear in the same trading day; however, it is a quick ticket to blowing the account to trade too many times.