Today one of my programs was happily trading ranges when it was announced that “UK Prime Minister Theresa May has announced plans to call a snap general election on 8 June”.
Suddenly, the GBP and EUR pairs took a turn that was not expected given range trading rules and considering previous technical data.
Many stop losses were hit.
Scheduled news is easy to see coming. This was not!
How do you program for these events?
I have a few ideas.
- Stop trading for X hours if losing some Y percentage of account
- monitor volume and stop range trading if volume goes crazy… I noticed that volume went through the roof on GBP and EUR pairs
- accept it as part of drawdown. no strategy is perfect and these events happen… acceptable if rare enough
I think some form of rule #2 is going to fix this. Usually, I check Daily charts to see if a pair is trending or ranging.
What happened today was a very fast surprise news driven change in market characteristics.
Very high volume spike is probably enough of an indicator that it is time to stop range trading. High volume can also indicate a break in support and resistance. Range game can be considered over at this point.
Thanks for the forum. Just writing this up has helped me think it through. I’d be interested in hearing other ideas as well.