As a “retail” trader or a trader on your own that doesn’t have a spot on a trading desk how can you trade the news?
Just so you know even many “prop” trader’s news feeds are delayed so much that they don’t have that much of an advantage over your average retail trader.
There are services out there that you can subscribe to that you will pay a monthly fee for to “show” you where bank orders are currently placed. An example of this would be a long trade planned by some traders from bank of america on the AUDJPY. Price had just made a daily close below “wedge support” on DEC 8 candle. This would have been largely considered a bearish signal and many traders saw this as an opportunity to sell short. I was made aware of the long idea by an ex colleague of mine, and not a service subscription as this information is truly not worth paying for if you have a trading plan with risk management rules in place.
Did their planned trade cause the market to go up instead of down? Who knows. Even at the institutional level we lose a risk managed amount often. Did I take a short trade here even knowing about their planned long trade? You bet I did. Why? Because it fit my trading plan. Did I get stopped out? Yes, I did. Did I still have money to go out and finish my holiday shopping after being stopped out? Of course I did. I’m not risking money I can’t afford to lose or that won’t easily be recouped by a winning trade.
Now I realize that by saying what I just said I have probably said too much, and will probably receive responses to prove that there was an order from a specific bank, and who knows what else from users that can’t get the bigger picture. I traded short even knowing there was a long order by a bank because there could have been an even bigger order short by some other traders that I didn’t know about. Ultimately my trading plan gave me a signal. I was stopped out. Oh well. It happens… Often.
Now you might be wondering why I am talking about bank orders when I said I would address news. It’s a sort of similar concept. Paying for a subscription to see where bank orders are placed is as useless as trying to speculate based off news for the average trader. So let’s dig in.
As a retail trader the only thing you really need to know about news is that the market’s reaction (price action) is what determines whether a result is positive or negative.
It’s not wether the numbers are green or red on the news release. It is determined by where price goes in the following hours/days. That’s it.
So as a retail trader you can trade the news by reading the price chart. I do it every time I trade.
So if you are currently constantly refreshing your screen waiting for the numbers to be released, numbers that will inevitably be delayed far too much for the average trader to even do anything with, so that you can place your market chasing trade based on the results or if you are concious of the delay and instead trying to “front run” the event and outsmart the market, as if outsmarting the market is truly possible consistently over time, my advice to you is to stop. That is a gambling mentality.
Instead, I would advise you to use the price action after the event to form your opinion.
Sit the news release itself out, let the market calm down and then make your decision. Your decision does not have to be to buy or sell. Your decision might just be to do nothing.
A lot of times after a news event there is a lot of wicking and price closes the day very near where it started or even in the opposite direction of the initial spike.
This is from my experience the best way for the average trader to trade the news. And you are trading the news.
A buy signal that forms according to your strategy after a news event, such as say a bullish engulfing bar from support (this may or may not be a buy signal according to your strategy) was formed due to the news. But this was not an impulsive gamble trade instead you traded your strategy and that is what will make you profitable in the end.
Markets are random, the results of news events are random, the outcome of a trade even knowing which way a particular institution is trading is random. The only thing that can be consistent is you following your own rules.