How do I factor in economic news into my strategy?. I’m using Price Action strategy on a daily basis, usually holding for a couple of days. So price will be moving in my favor then some important news about the countries economy/currency will be released either destroying my gains or giving me an instant boost? How do get around this? Just be aware of it?
Thanks
Well one way is to maybe keep track of the high impact news events, and just close your trades before they come out, just to be safe. Or, maybe noting the type of news events that occur when there is a boost vs. when you lose. Maybe test it on a demo if you haven’t tried already. Any other thoughts?
I only trade long-term so price reactions intra-day to events are rarely an issue. Obviously, I have a stop-loss set on all open trades.
But I do take indirect account of fundamentals in forex. so for each major currency I note whether its central bank has been hawkish or dovish with its interest rates at the last rate decision - increasing or reducing the rate. And I note what the market expects the central bank to do on the next rate decision date. e.g. FOMC is hawkish, so I have noted to avoid short positions on the USD.
I also note what the other pairs featuring each major base currency are doing. So, if the EUR is bullish on all its charts against every other major currency, I am unlikely to go short on the EUR against anything.
Occasionally I will tighten stops or even close positions if some major news is expected, e.g. if I was deeply long on the EUR, the positions were in serious profit and the ECB is due to announce a rate cut.
My principle is, if it doesn’t move price, ignore it.
To add to the already good comments here, I always just keep an eye out for the big ones and either close or let it roll. Close if maybe I am already almost at my stop or if I have just about hit my price target, or let it keep going if it’s somewhere in between. Keeping stops from being too tight is helpful to prevent from getting whipsawed. I use the Average True Range to gauge the average price movement range, and to help me keep my stops from being too tight.
I am also using the PA strategy! but, before the high voltage news like FOMC, NFP I close all of my trades.
Backtest the reports prior to your trading day and you will identify how your pair reacts to the outcomes of certain reports