I am trying to develop a strategy for news trading. I understand the risks with slippage/high spreads immediately after the news is released and would like to come up with some ways around this.
A couple of ideas I had:
Trade a less common pair when the news is released, e.g. US jobs report comes out way better than expected. Go long the dollar versus the Australian dollar instead of trying to go long versus the Euro or Yen.
Instead of trading on US economic data releases, trade on foreign data releases that come out in the middle of the night.
In each case I’m trying to avoid the herd of people that cause the crazy volatility but still take advantage of the inevitable short term bump based on the news.
Any thoughts on this or other ideas would be greatly appreciated.
I have found that the spreads settle down a few minutes after the news. For what it’s worth, here is a strategy I use.
Look at the big releases for all the majors:
Interest rate decisions and Policy statements (for RBNZ, RBA, BOE, FED, BOC, all the majors)
CPI (inflation reports)
Retail sales
NFP
Employment reports for other coountries
These releases are the announcements that move the markets the most. I will watch for the market reaction when the release comes out. If you get a spike of 30 pips + in the first minute, AND the number has come in unexpected, then we have a set up.
Often price will spike up, and then within the first 8 minutes there will often be a retracement - maybe about 20 pips. I like to mark in moving averages and fib levels (from higher timeframe charts) and look for price to retrace down to these levels. That’s when I’ll jump in.
If you miss this, or are not quite sure about where price is going, sometimes there is another retracement 10 -30 mins after the release. By this time the big dogs - fund managers etc have been able to re-evaluate their positions.
Sometimes there are even bigger issues (like geopolitical uncertainty, or sovereign debt crisis) that can eclipse these important scheduled announcements. For example, I have seen GBP/USD move 200 pips higher because the CPI report was 0.1% higher then expected, but then this has happened again and GBP/USD wll move down, because of bigger issues around downgrades/ sovereign debt.
I’d like to try the following strategy upon news releases:
go long and short at the same time, say 30min before the release
after the release sit back and watch the action closely
when you think the current movement has the “right” direction(after serveral spikes), close the losing trade from the hedge and add a protective stop to the winner
if your stop does not get hit, grab your pips :o
What do you think about this strategy?
To me it seems this strategy has the advantage of being in the market right [B]before [/B]the release, so you will get a tight price [B]without any slippage[/B].
Drawbacks could be:
closing the losing hegde position may also be dangerous cos of the volatility
hedging will cut profits
two spreads must be paid(no big deal for EUR/USD)
Looking forward for some comments on this and maybe there is someone here who is trading this way.
Thanks,
(Please excuse my bad Englisch, I’m not a native speaker.)
There are very useful pieces of advice on the thread specially beginners like me.I t had benefited me a lot to join this forum.I have seen that often the news are misleading and the pair that is fueled more over the news are often the less profit giving.
I would expect that the sudden wide spreads would work against you when you’re trying to close the position. Have you had any success with this approach in the past? Curious about your experience with this.
i have a huge gap in my knowledge. I’m just clueless on how to trade, using fundamental analysis. If someone could please give me some links, or explanations on how i should react to the news on published on the calendar, you would help me out a lot. Thank you