Trading the news - what are the odds?

[ssnvet]

So where do your guys get your information for news trading? Is babypips' calender enough, does this calender get updated right away, so you can compare actual to forecasts, or do you guys use other sources?

Thanks.

I have never tried using the BabyPips calender - you might try it by refreshing the calender page at the moment of the news report.

[kummi90]

I have never tried using the BabyPips calender - you might try it by refreshing the calender page at the moment of the news report.

Okay. So what DO you use?

[PipBandit]

Forex Calendar @ Forex Factory

It's pretty popular also. There's not much point trying to use it to get a jump right on a news release as you're up against big players who have the numbers long before you get it by hitting refresh. Spreads will have blown out also right at the moment of any big release so you're better off taking a position shortly after the release.

You should also be aware that speculators sometimes may drive a price in an unexpected way immediately following a release to run some weak stops before pushing it in the direction that you'd anticipate from the data. Today with E/U would be an example where it dropped quickly after the good ISM numbers as speculators flushed out the weak longs under 1.4450 before quickly reversing course and heading on up towards 1.45 which is where you'd initially have expected it to go as a "risk on" environment was generated.

[ssnvet]

Okay. So what DO you use?

The same Calender as PipBandit is talking about.

[shaforex]

ssnvet, I enjoyed reading your point of view on trading the news. Sounds more than plausible and after all, it's always down to figuring out the odds, which makes a trade successful.

Can you just clarify something for me, please?
There are news items every single day. Even if you just trade one pair, that's two currencies' worth of news releases. I'm assuming you're only trading the ones with high impact, but even so, which ones would you say move currencies most? The Forex Factory calendar must have about 20 or so 'red factory icons' (i.e strong impact) throughout the month, and that's just USD, probably a similar number for the second in the pair.

[ssnvet]

ssnvet, I enjoyed reading your point of view on trading the news. Sounds more than plausible and after all, it's always down to figuring out the odds, which makes a trade successful.

Can you just clarify something for me, please?
There are news items every single day. Even if you just trade one pair, that's two currencies' worth of news releases. I'm assuming you're only trading the ones with high impact, but even so, which ones would you say move currencies most? The Forex Factory calendar must have about 20 or so 'red factory icons' (i.e strong impact) throughout the month, and that's just USD, probably a similar number for the second in the pair.

There are 6 countries whose economic news releases I watch and have traded currently - there were a few more when I first started, but dropped for different reasons.

I monitor and trade the following:

The European - the U.K. - the US - Canada - Australia - and New Zealand.

As follows:

EUR - German Factory Orders MoM
- German ZEW Economic Sentiment

GBP - Consumer Price Index YoY
- Manufacturing Purchasing Managers Index

USD - Non Farm Employment Change
- Core Retail Sales and Retail Sales
- Existing Home Sales
- New Home Sales
- Core Durable Goods Orders and Durable Goods Orders
- CB Consumer Confidence report (Conference Board, Inc.)
- ISM Manufacturing Purchasing Managers Index
- ADP Non Farm Employment Change (Automatic Data Processing, Inc.)

CAD - Building Permits
- IVEY Purchasing Managers Index (IVEY School of Business)
- Employment Change and Unemployment Rate

AUD - Gross Domestic Product QoQ
- Retail sales and Core Retail Sales
- Employment Change and Unemployment Rate

NZD - Retail Sales and Core Retail Sals

When there are 2 related reports being released at the same time - such as Core retail Sales and Retail Sales - if they are in conflict, I will normally pass a trade by.

[shaforex]

Wow, that's a lot! Must keep you busy

Not that I'm asking you to divulge all of your secrets, but I'm curious - which pairs do you trade when there's only one item of news out in a day. I'm assuming that if two countries' news items come out on the same day and that one is bearish on one currency and the other bullish on the other currency, then by the 'double-whammy' effect - that would be a pair to trade in the obvious direction. But if, say you just have the German Factory Orders out and nothing else is due that day - would you trade the EUR/USD or go for other crosses such as GBP or JPY? Likewise for all other currencies - is the default trading the dollar crosses?

Thanks for sharing and good luck! Looks like you've honed your system down quite well.

[ssnvet]

Wow, that's a lot! Must keep you busy

Not that I'm asking you to divulge all of your secrets, but I'm curious - which pairs do you trade when there's only one item of news out in a day. I'm assuming that if two countries' news items come out on the same day and that one is bearish on one currency and the other bullish on the other currency, then by the 'double-whammy' effect - that would be a pair to trade in the obvious direction. But if, say you just have the German Factory Orders out and nothing else is due that day - would you trade the EUR/USD or go for other crosses such as GBP or JPY? Likewise for all other currencies - is the default trading the dollar crosses?

Thanks for sharing and good luck! Looks like you've honed your system down quite well.

Those are good questions - I have found, for the most part, that short term trades during a news release are not affected by other daily news reports - since I try to get in and out within a few minutes. Long term may be different.

I have been keeping records of currency charts related to each of the news reports I monitor - for the last 3 or 4 years. Over time, a pattern has shown up for each news report set of related currency pairs and some unrelated pairs.

I found that the only time there will be a problem is when 2 related news reports are within a half hour of each other.

Traders appear to prepare for a high impact news report 6 or 7 minutes before the report release - most do not want to get caught up in an unknown.

The German Factory Orders release is coming out Wednesday, the best currency pairs I have found for a trade have been the EUR/USD and EUR/JPY.

There are 2 other news releases I will set up to trade, the CAD Building Permits and the AUD Employment Change along with the Unemployment Rate.

And, I will keep an eye on the USD - Non Farm Manufacturing Purchasing Managers Index as well as the NZD - Gross Domestic Product.

I will post more tomorrow concerning the German Factory Orders.

[kummi90]

Thanks for your help ssnvet!

[ssnvet]

Early tomorrow morning, the 6th of July, 2011 at 6:00 AM ET, the Deutsche Bundesbank will release the German Factory orders.

Of 21 releases I monitored, 7 releases were traded - 3 of the currency pair EUR/USD and 3 of the currency pair EUR/JPY.

There were 12 trades with 6 winners, 1 break even and 5 losers - the odds with this news release do not seem very favorable, only a very, very slight edge.

The economists have difficulty forecasting this news release correctly, and the market moves very well when they are wrong by 1.3% or more. With this in mind, I feel there is a pattern to be found that can provide a much greater edge.

Tomorrows forecast is -0.5%, a big drop from last months report of +2.8%. So….if the actual report comes out higher than the forecast by +0.8 or more, this would be a bigger surprise to the market than if it were lower than the forecast.

I am looking for +0.8% or higher for a buy of the EUR.

If the actual comes out at a -1.8% or lower, the market move may not be as great, but still possible, a sell of the EUR would be appropriate.

The broker spread is important.

I watched the charts for this report for 9 months before feeling confident to make a trade.

Confidence is a big factor!! So, practice is needed.