There are no rules or restrictions against insider trading in the world of forex trading. Anyone who possesses information that is known only to a select few can and do trade that information in the forex market.
News is information. Information is what drives the forex markets. Publicly released news is disseminated to the various newswires. Any trader who has access to these newswire services can tap into that information and react accordingly in the forex market. Timely reaction to new information can be very profitable.
However, institutional players do get information that retail traders dont have. Institutional players have access to the order book and they may also know something that others dont through their contacts in the industry.
Sometimes, the news may give an unfair advantage to the institutional players. But at other times, this isolated news access may not translate into real market action if other players dont have that information.
You now know that the forex market is dependent on news. There will be negligible or little price movements in the market if there is no news. The volatility in the forex market is news driven. You can argue that the currencies move based on the technicals. Even then, these technicals have been established previously by news or expectation of future news.
Now the market reaction to the news is staggered. The market reaction to the news is specific as it depends on both the type of medium that the news is transmitted on and the type of news that is being released.
The online news service relay the information to the computer monitors of the traders at almost the same time as the market event occurs with no delay or a very slight delay that may be negligible. Most active traders get their information from these online market news services. So they can react almost immediately.
Other less active traders feel they dont need real time news. So they rely on market commentaries written by analysts and published on websites or in newspapers. The market reaction can thus be staggered.
Part market reaction may be immediate within the first few second from those who receive real time news. Part market reaction will be more delayed reaction from those who obtain the same news hours or even days later. Some part of the reaction will be immediate while the other part will be delayed and come in a few hours to days to weeks. So staggered market reaction means that the market will react over time.
Forex economic calendar is usually packed with an average of twenty economic news releases per trading day. The market reacts differently to different news. Some news may produce little or no reaction at all.
Currency prices adjust very rapidly to the released data during times of scheduled news releases. You have to be selective to what news to focus on as the market reacts to a varying degree in relation to the type of news that is released.
Currency market reacts to what of the news rather than the why. For example, the currency prices will move as the market reacts to the better than expected unemployment figures. The market will not have time to consider why the unemployment figures are better this month as compared to the last month.
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