Question: Trading on market news

Hi All,

I’m new to this forum and this is a my first post.
I’ve few questions about trading on market news. (Yes. I’ve gone through the lessons)

1.Sometime I’ve seen that even after the unexpected result, market move on the other side not the direction it should go.
For an example, after the news yesterday about “Prelim UoM Consumer Sentiment”, I was expecting USD get weak .Because the result was too bad for US economy (actually was worst than previous and forecast). But unfortunately USD got strong. What are the reasons behind that behavior?

  1. Although USD get strong against EUR,GBP and MXN(I didn’t observe other currencies).But got weak against JPY.
    Why USD behave in that way (strong against some and weak against others)?

  2. Think we analyzed and put orders using none directional methos.Even if use that method,still there is a good chance to market move to one direction(buy) first and trigger our orders and before hitting our TP targets and reversing it and touch SL.An then it trigger other order (sell) and go few pips and again reverse it and touch our SL.So that kind of situation we might loss our both orders.How come we overcome these probles.

thanks in advance

Heres my advice on trading numbers/news. First of all dont try to predict it, no one knows the numbers until they come out. The traders who are playing them are well in position 1h+ before anyway, then the calm before the storm. I guess I can address your questions one by one.

  1. First its the preliminary estimate not the final report. hence Prelim. Second thats just how news trading works, just because a number is above/below expectations its not going to move that way 100% of the time. Maybe the market already baked in a lower estimate then actually came out so it corrected to the real number, or 100 of other reasons. The fact that matters here is, what the market actually did. Never think about what the market “should do” vs what actually happened. This is a game of limited information, you will NEVER have the entire scene.

  2. Remember these are currency PAIRS, forex is not 1 instrument. But something in relation to another thing. Like gold, oil, natural gas peg 1 price to 1 commodity. The commodity side is fixed, how much for 1 contract, the price side fluctuates, based on the market. In forex, both sides move, this relative pricing is what causes different reactions for different pairs. In order to see how the USD did in general, your going to have to check the USDX. But again that is just the USD measured by a basket of pairs, specific weightings can be referenced on your own.

  3. Specify non directional method. I would venture 99% of the trading done on this forum is directional. Non directional or market neutral are for spreads, and arbitrage. If your talking about bracketing the market, for example. placing buy stops above market price + X and sell stops below market price + Y. Then yes, your going to get whip sawed a lot. Because news events especially major ones. Liquidity is removed and volatility increases. How do you overcome those problems? Don’t trade that way. Develop a different strategy.

In general I would advise you not to trade economic news. There is no way to predict the figures and the best you can do is a 50/50 guess which has nothing to do with trading. Rather than trading the news you may want to use them and the corresponding move to add to your existing positions or exit them. As MeiHua said, develop a different strategy.