Probability Patterns of News Announcements, Opportunities?

Trading Discussion News and Economy
1

BabyPips.com is probably the best place for a newbie to learn about FOREX trading, not only are the lessons full of practical information, but the FORUM and BLOGS provided are very helpful as well.

This web site is where I first came when I read about FOREX in another web site forum (not a FOREX related site) about 3 years ago.

I have been �lurking� on this forum for about 2 years or so and have made a few posts as well.

Those of you who have read a few of my posts know that I am very interested in trading the calendar news announcements - I guess that is because of my impatience with waiting for something to happen. You know about waiting for water to boil on the stove.

While learning about trading stations, candlesticks, market orders and limit orders, I noticed a pattern emerging around the time that certain News Announcements were scheduled, many of you have probably noticed as well. These patterns more often than not, are repeated each time that that particular News Announcement comes up.

And the patterns go something along these lines -

Within about 10 minutes prior to the scheduled announcement, one of 2 things happen in the market, it slows down to only a few PIPS up and down (traders waiting for the announcement).

Or, there is a huge spike up or down (traders getting out of the market so as not to get caught going in the wrong direction).

The patterns during and after the News Announcement - in my opinion, give opportunity for some good �scalps� and even some long term (within an hour) winnings.

The first minute of the News Announcement can be very volatile, but even in the first minute there is opportunity should the market for that particular News Announcement have a pattern of retracing.

But�
There are 2 difficult situations in that first minute or two that a News Announcement is released, and it has to do with brokers. Some brokers use trading software that is not up to handling a very fast moving market, and will cancel out a �market order� when executed due to �slippage�, and�

Some brokers increase the �spread� they charge before, during and after?
Both situations can be costly in a trade.

The broker I use provides a means for the trader to adjust the market order to compensate for �slippage�, but there is no way to get around the �spread� problem, unless you are lucky enough to catch the broker asleep at the �switch�.

As I have stated in earlier posts on this forum, there are about, on average, 50 News Announcements each month that produce money making situations.

I have been tracking and recording the results since May of this year. The patterns have been pretty consistent up until the last 2 months, September and October, when the world economy started its plunge into darkness. Now it seems that the probability of what happened the 4 months prior to September, when a certain News Announcement was released, may not happen this time around.

However, I am optimistic that eventually the world economy will return to normal, not necessarily improve in the short term, but return to normal operation.

That having been said, I will continue with my plans and my tracking of patterns.

I have learned much from BabyPips.com, I hope with the following Forum posts I am giving something back - I suppose the only way I will know is by any comments by posters who may have some interest in these posts.

Those of you who are interested, please look for one or two new posts on this thread between now and the 30th of November. And one or two a week after that.

2

On December 1st, 2008, the GBP Purchasing Managers Index for Manufacturing report will be released at 4:30AM New York time by the Charter Institute of Purchasing and Supply (CIPS).

In addition - to the PMI - Manufacturing report, the Net Lending to Individuals Report will come out, this will probably not have any affect.

Since this report is a leading indicator of the U.K.'s economic health based upon a survey of Purchasing Managers - foreign currency traders pay particular attention when the report is scheduled for release.

If the actual report is different from the prediction, the traders will scramble to take advantage - whether it be to maximize gain or to minimize losses.

Traders who watch this Index will make a trade, or not, depending upon the result of the report.

If the actual report comes out higher than the prediction, and the difference is great enough, the market should move in favor of the GBP. If the actual report is lower than the prediction, then the market should move away from the GBP, or, be selling it in favor of another currency.

Several different currency pairs are affected by this market report, but it is the GBP/USD that I have noticed is most affected by report surprises.

Those of you who are interested in watching this report and how it affects the market, here are some tips:

The FF calendar has a button that appears beside the report about 5 minutes prior to its release, by clicking on the button when the release is scheduled, you can find out what the actual report is in a minute or two.

If your broker uses a �spread� to make their income and you are watching your charts, set a �market order� up (recommend you use a �live� trading chart) with a �stop loss� of say 30.0, that way you can monitor how the �spread� changes, if at all.

I do not recommend a trade at that time unless you have a lot of experience. With the World Economy as it is, no telling what may happen.

3

At 10:00 AM New York time the following 3 news reports will be released:

USD- ISM Manufacturing
USD- ISM Prices Paid
USD- Construction Spending

The ISM Manufacturing is probably the most watched, and may have the most influence on the market.

This report comes from the �Institute of Supply Management� (ISM) which comes about from a survey of purchasing managers for the �Purchasing Managers Index� (PMI).

The report uses the information as a gauge to future economic conditions in the USA.

A positive report is good for the USD - however, the nature of currency trading allows for a possible profit either way that the report comes out - if the report is negative, a profit can be made by selling the USD, if it comes out positive, a possible profit by buying the USD - short term and long term.

But there is an added possibility of a profit in a trade at the few moments after the report is released.

Top economists around the country have came up with a prediction or forecast of what the report will come out at which is usually published in FOREX calendars at various related web sites.

Should that report be different enough from those predictions, traders spring into action to take advantage and the currency market may move rapidly 30 or more PIPS in a matter of seconds.

Probably the 2 best currency pairs to watch is GBP/USD and USD/JPY, they seem to have the most movement , at different times, when there is a good difference between the actual report and the forecast.

4

I monitored the GBP - PMI - Manufacturing report which was released at 4:30AM
New York time and here is a brief summary of one of the Currency pairs:

GBP/JPY – The first 6 minutes after the release of the report, the market
moved down about 70 PIPS with very minor retracing.

The spread on my chart started at 5.9 PIPS 5 minutes prior to the
report release, moved up to 7.9 PIPS about 52 seconds prior to
release and remained there for at lease the next 6 minutes.

The revisions to the previous reports were not released until
about 3 minutes later - then the market continued down.

I used a change of 4 from the forecast, the change from the
forecast was a little more than -5 - selling the GBP/JPY was a
winner.

GBP/CHF had a big move down as well - about the same as the GBP/JPY.

5

I monitored this USD- ISM Manufacturing report at 8:00 AM New York time and here is a brief summary of one of the Currency pairs:
EUR/USD – Moved up about 23 PIPS first 5 minutes, then retraced.

The dealer spread 5 minutes prior to the report release was 0.9 PIPS,
18 seconds prior to report release the spread moved up to 10 PIPS,
until 28 seconds after the report release, then back to 0.9 PIPS.

The revisions to the previous reports were not released until
about 3 minutes later - the market continued up for 2 more minutes before the
retrace.

I used a change of 3 from the forecast, the change from the
forecast was only -1, not enough for any serious movement.

6

On Tuesday 12-09-08 at 10:00 AM New York time, The [U]US Pending Home Sales[/U] report will be released along with the US IBD/TIPP (Investors Business Daily/TechnoMetrica Institute of Policy and Politics).

The pending home sales is the more important of the 2 reports, the previous was at -4.6% and the forecast is a -3.2% (this is the FF calendar - which could change later), if the actual report comes out higher than the forecast, this is good for the USD and if trading the USD/JPY, the pair may move up.

Sometimes the market appears to hesitate a few minutes in anticipation of a revision of the previous report, which if happens could change the dynamics of the market.

I will be using a differential of about 5.0% from the forecast, if nothing else, these things are entertaining to watch.

7

The US Pending Home sales came out much better than the forecast, the adjustment of the previous report was only 0.2%, so, no real affect.

Pending Home sales improved by 2.5%, not the 5.0% I was looking for - however, the USD/JPY did move up without any retrace for 3 minutes, even then when it did retrace it did not go back to the open of the report.

In a 20 minute period, the pair moved up about a total of about 24 PIPS, a small scalp was posible.

8

At 10:00 AM New York time on December 18th, 2008, the following 2 news reports will be released:

USD Philly Fed Manufacturing Index
USD Leading Indicators for October

The Philly Fed Manufacturing Index is probably the most watched, and may have the most influence on the market.

This report comes from The Federal Reserve Bank of Philadelphia which comes about from a survey of manufacturers in the Federal Reserve district.

The report uses the information as a gauge to future economic conditions in the USA.

A positive report is good for the USD - look for a big difference between the actual and the foecast - USD/JPY is probably the best pair to follow.

9

I know there�s enough pessimism out there but I do not expect for this report to be encouraging for the investors. I have a feeling that tells me that changes in business growth weren�t positive.

10

Hi ,
Well the Philly Fed came out better than expected by 7.1, and there was no adjustment in the previous report - however it had little effect on the USD/JPY currency pair.

The pair was already trading up and continued up. However, some of the other currency pairs with the USD went against the USD.

I believe that current economic conditions weight much heavier on trading than normal.

11

They certainly do. Trading is not what it used to be, you cannot rely anymore on what at another time would�ve caused huge changes in the currencies, last week the Treasury Department Statement did not cause much either.