Does anyone have strategies for successfully trading when pairs have high impactful reports come out causing high “lightening bolt” type candles? ive tried hedging but end up losing both.
Do you believe in mean reversion?
Tbh, I am not familiar with that. I am pretty new to this but eager to learn.
Am on mobile, so I can’t really explain in depth but let me give you a quick run down.
The mean reversion trading strategy basically believes that over time, the price of an asset will revert back to their average historical price over time.
If there is a big drop on news, mean reversion theory believes that the price will recover; not fully but it will to the extent of an “average”. So you can try buying the dips.
Conversely, if there is a big surge on news, mean reversion theory believes that the price will drop back to a level of an “average”. Hence, you can try selling the rallies.
Just explaining in simple layman terms. Obviously you have to be able to mark the pivot points, the fib levels and the S/R levels too, but I believe I have explained in essence how you can adopt a trading strategy to trade high impact news.
Depending on the overall trend of what you are trading and the variance of the released data compared to expected.
If the reaction is in the same direction as the longer term trend the price may not revert back to the average like the previous person suggested it should.
But if the reaction is against the longer term trends it is more likely to soften the previous trend but may not have enough effect to reverse the longer term trend.
And to know when these opportunities are coming you can refer to a Macro Economic Calendar. The calendar will tell you the exact time to the second when the data will be released, it will tell you the expected figures and after a short delay will show the actual released figures.