Firstly, let’s take a look at what news in forex is and why people care about it. This will help us understand what’s going on in the background and why it moves the price so much when released.
To put it simply, news releases are almost always economical-related news. For example: US CPI Data, which is released every month, about 11 days after the month ends. The reason why traders care about CPI Data is because consumer prices account for a majority of overall inflation. When evaluating a currency, inflation is important because higher prices lead to higher interest rates as well. Before they release there are 2 percentage numbers, a forecast and a previous. These two numbers show the previous release, which was for example 0.2% and the forecast, which is what they predict the next number to be. Which is, for example 0.3%. Then the release comes and you have Actual, this is the actual number and if the Actual is greater than Forecast, then that is good for currency.
Now, because of the impact that inflation has, this is of course one of the most popular news releases to trade. If a news release has less impact on the currency, less traders will care. The top 5 most important are Central Bank Meetings, where interest rates and policies are determined, NFP (Non-farm payrolls) which is the measure of changes in non-farm employment, CPI which was just explained, GDP (Gross domestic products) and lastly, interest rate decisions.
Every time one of these gets released, you see a huge spike in the price of an asset. This causes high spread and slippage to occur, which can make entering and exiting positions extremely risky as you’ll get entered very far from your desired entry point. Many traders get liquidated on these events and blow their accounts which adds more fuel to this giant fire.
I would never advise anyone to trade news, but if you really want to, just ensure that you have a stop loss set just in case. Make sure you enter a few minutes before the news event and a few minutes after; this will keep you out of the bad slippage and spread and will help you get more accurate entries and exits.
News trading is one of the riskiest forms of trading and is extremely unpredictable, make sure to be very cautious and always check the news calendar before you start trading.
(Just my opinion, not financial advice)