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I think that more than looking at what kind of reaction is most, we should talk about what kind of news generates the greatest impact. It’s not the same unemployment rate as an unexpected inflationary data. And let’s not talk about political or geopolitical news. A misinterpreted statement, a bad tweet... and it’s linked. Sometimes a phrase moves more than any economic data.
If you are only looking for the most volatile pair to feel adrenaline, I warn you: you better go to the casino. You save yourself the analysis and frustration. Unchecked volatility leaves you out in two weeks. The key is to know when to operate, not how much it moves. You can earn a lot with small moves if your entry is accurate and your risk is well adjusted. You don't need fireworks to win.
I personally like to operate CAD during oil news. It’s not as violent as other pairs, but if you understand the correlation with crude oil, you can anticipate it quite well. People underestimate the impact of oil on forex, but in pairs like USDCAD or CADJPY you notice it very much. You just need to know when to look and with what volume to enter.
What happens is that a lot of people go into business without having done or backtesting. They think watching two videos on YouTube is clear, and then they cry because the market tricked them. It’s not that the market fooled you, it’s that you entered without preparation. If you’re going to operate news, minimally test with historical data and have a clear system. If not, get ready to pay the account to the broker.
There are some who in events like NFP inflate the spread, slip you in and run you late. And then they say it’s not their fault. That’s why I always recommend operating this kind of thing in real accounts only after seeing how your broker behaves at those times with demo. It can save you a lot of dislikes.
Exotic couples also react very strongly to news, but no one mentions it. USDTRY, USDZAR or USDMXN move like crazy with any U.S. data and on top they have high spread. I operated for a while but I got tired of the extra risk. Unless you have a very refined system and good execution, it is easier to lose than to win. Better to stay with the known.
In the end, the biggest movement is caused by fear. More than the news itself, it is the surprise that makes the candles explode. If the market already expects something, it does not move. But if it is surprised, there is a reaction there. That is why it is so important to look at the forecasts, the consensus and the general feeling. It is not enough to know what is going to be published, it is necessary to know if what is published surprises or confirms what is expected.
I think the worst mistake is to get right into the second that the news comes out. It’s like standing in front of a stampede and hoping to get out unharmed. Better to wait for the dust to settle. One inning two or three minutes later, with the clearest direction and the normalized spread, it’s usually safer and more profitable. It’s not that exciting, but we’re not here for the excitement.
I have specialized in employment news and monetary policy. They are the ones that move the most and have a more predictable impact on price behavior. Of course, not always right, but with a good strategy based on post-news reaction patterns, you can operate quite well. Yes, discipline above all.
Once I operated without knowing that there was NFP. I saw a giant candle in EURUSD, I got scared, I closed manually with loss and then I knew what had happened. I look at the calendar every morning. It’s absurd not to. It’s like driving without looking at the GPS and then surprised you because you entered a closed street. If you want to operate seriously, you have to know when there are possible earthquakes.