Hi FE!
When I came across the article I thought about your open long NZD trades and thought id post it here.
[I]“I always think the best way to understand sentiment is the reaction later on for the news. If currencies are strong they bounce back. If they are weak, they stay on their new level until the next bad news come out. If a good news come out then the weak currencies will bounce back to the downside. I think this is the matter with NZD currently. It does not gain basically anything and cannot bounce back from any bad news. This might be the beginning of the big reversal”[/I]
I agree with that wholeheartedly!
As for trading the news I know its a fast way to make big pips especially NFP. But also a fast way to lose your money if you don’t know what you’re doing. And a lot of the times we don’t even though we think we do. I just think it’s not worth the risk. So much noise. It’s so easy to get wiped out for small players like us.
But I like your idea to trade the retracement of negative reaction. I think I’ll try that out myself. Sounds less risky to trade the news being actually in prior or when the news is being released. And I have actually seen that happen live on charts with several pairs. They pick up the losses if they are strong already its only a matter of how fast. But like you said if there’s no strenght in that currency any negative news will only send them further down. Good point FE! Never really thought about it this way.