I just read the article “How to Trade the News Using the Straddle Trade Strategy”. (I cannot post a link, so you can just search for the article.)
WOW! How naive and dangerous!
There are no guarantees that the triggering of an order will result in the order getting filled near that trigger price!! That goes for entry price, stop loss price, and take profit price!!! This means that YOU CAN LOSE SIGNFICANTLY MORE THAN WHERE YOUR STOP LOSS IS PLACED!
Let me give an example that lasted less than 10 seconds. I did a little experiment of a news straddle trade on one of my live accounts using XAUUSD because it is very volatile. BOTH the pending buy and sell orders got triggered. One direction netted a few POINTS of profit while the other side netted over 100 PIPS negative! “How could that be?”, one might ask. . . This negative overall result occurred for the case that was not even considered in the article in which entry price, take profit price, and stop loss price all got triggered, but there were no available contracts near the entry price when it triggered order exeution (which results in a market order being issued). Price even went BEYOND the take profit price, but the open trade failed to close at this excellent profit level because once again, there simply were no available contracts in this price area. Instead, the available contract to close the trade was just a few points of profit. And price immediately reversed and PASSED THROUGH my pending order on the other side, triggering this order in the other direction. However, once again, there were no available contracts near the stop loss level, and the contract that finally was executed turned out to be at a more favorable price than that maximum level that price had spiked to, resulting in a smaller loss than would have otherwise happened.
The situation is not one I’m familiar with. I trade through a spreadbetting firm so there is no requirement for contracts with / from other traders - the SB firm simply logs the trade, and it’s up tot them simply to ensure they are covered against risk from their client group’s trades winning. You know, they are market-makers.
Market-makers get a lot of stick on babypips and everywhere else on the internet as there is a suspicion they make their own prices and rig price movements to run stops. In the UK this is rubbish as it would be illegal and simply cannot be concealed for long. In SB there are no “fill” issues, slippage is a minor risk, likewise contract gap issues like this one; the trader’s profits are not dependent on what another single private retail trader somewhere in the world wants to do.
I also made this experience with pending stopsell and stopbuy orders prior to important news/statistics events to catch some pips in the up or down spike - it seemed like the wholy grail to make money. After the first attempts i realized, you never get the pending price in the spike, thats impossible in fast price moves, so this “strategy” to catch spike-pips is more or less sensless.
I became a fan of entering an ident long and sell order (hedge position) prior to the news/stats release, and close after the first spike one order in profit and than the other during a counter move. (if there is one). I know many dont recommend that, nevertheless it works sometimes and you have more control over the price you want to close your positions.
Especially in situations when more data to one event are released ( as we know NFP is not only NFP but also some wage numbers) and the numbers point in different directions, you see the nervousness of the market participants in the price movements, up and down during the first seconds and also later on the M1 chart untill there is a tendency in one direction. In such a situation its easy to make with a hedge position profits.
On the other side if it turns out after the release, that “all numbers are green/red” it may happen that you close the first position in profit, and than price keeps on running in this direction without bigger counter moves and you cant close the second position to be in overall profit…
Cause of those reasons, i made the best experience for news/stats trading: open a hedge position, wait for the outcome of the release and close the legs appropriate to the situation. Some may say " Why open two positions if you wait for the outcome? You can wait for the outcome and open than appropriate one position?" Thats right, but it takes too much time - its more profitable to close a position with one mouse click that is allready open, than doing two clicks to open and close a position.
Straddle trading news release can be done quite successfully.
I have an EA from a prop firm that is designed for this purpose.
The idea is to set the EA buy and sell orders at a distance from the market a few seconds before the numbers drop.
And the orders can be set with take profit target and trailing stop.
The orders placed are OCO (one cancels the other) orders.
On release of the numbers if they are as expected but the market triggers one of the directions best to flatten out asap.