Tommy's fundamental scalping adventures

Trading Systems
1

Hi all,

I have been having success and lots of fun with very short term trades scalping news and data reports.

I am going to give you this piece-wise, so that I can reach the 5 posts so that I may include links…

On a daily basis, I’m profiting 50-100 pips with fundamental scalping.

More to come.

TommyO


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A few rules to go by:

  1. Get in right before the news, about 30-60 seconds before the release to avoid gigantic spreads due to volatility, generally a 150 pip limit order, and a 20-25 pip stop loss.
  2. If you are wrong, and the market moves against you, DO NOT TRY TO JUMP IN THE OTHER DIRECTION. Sit it out, chalk it as a loss, and write about it in your journal. Why, what, how, everything. Otherwise, more times than not, I have lost MORE money trying to enter too late. The spread can jump from 0.1 pip to 50 pips in the time it takes you to hit the button.
  3. Once you get about 25 pips in profit, slide your stop loss to cover spread and commission, usually 1-2 pips ahead of entry price.
  4. Exit when you think it has reached maturity or hits a technical level that you think will be the end of the move, more often than not this will be premature (at least for me) but I take my 50-100 pips with a smile, and don’t feel bad about 20 minutes of work to make a really nice profit.
  5. The crux here, and the dangerous part, is choosing before the news is released how the market will respond. Sometimes there is a “tell” a minute or so before the news is released, sometimes I’ll think about the latest few news reports from that country… are they doing well? what was the latest rate decision? what was the latest unemployment? etc. If they are doing well recently, I’ll buy that country, if they’re tanking, I’ll sell that country.
  6. Look for the news fade after the move is over, and you have already exited the position. Sometimes you can double or more your profits on the initial move. Sometimes the move is not over and you can lose some of your profits from the initial move. I personally don’t usually go for the fade unless it’s obviously coming.
  7. Pair weak currencies with strong currencies… duh.
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March 3 Canadian GDP 75 pip profit short on USDCAD

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March 3 Australian GDP 45 pip profit long on AUDUSD

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March 4 US non manufacturing PMI and preliminary unemployment 65 pip profit short on EURUSD

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Later on March 4 (today) Australian Retail Sales and Import/Export, and other news

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Australian news on March 4 - non-event, stopped out at +2 pips, went short on EUR/AUD. Lots in the news tonight and tomorrow: GBP and Euro rate decisions, and Canadian Ivey PMI. Not sure where Euro and GBP are headed, if actual numbers meet expectation, then non-events, most likely. I expect the Canadians to drive their currency higher.

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Hi Tommy - it was March 4, 2015 you posted it first time. How is it going since then? An update would be appreciated.

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I’m an easily distracted one. I have lately been changing gears and looking at the pre news sentiment, and then exiting right before the news. Kinda riding the news event get built into the price before it actually comes out. I had fun with the NZDUSD and the NZD rate decision, and the USD rate decision.

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A few more details on how I’ve been doing the pre news “scalping”

Find a major news event. Talking rate decisions, employment, retail sales, cpi/inflation, the big ones.

I am finding that if you look about 1-3 sessions before the news is released, you will find a swing that represents the market sentiment with respect to the upcoming news event. To this end, I think the most useful indicator I have is a session hours indicator that I have from FXCM Trading Station 2.

For example, this last week, there was the FOMC statement and rate decision for the US, as well as the rate decision for the NZD a few hours after the US decision (last week of April 2015). There was a really nice swing to the topside in the NZDUSD pair, and I rode a long position that started at the beginning of the Asian session (about 10pm Colorado time) the day before the big rate decisions were released.

The market sentiment was to sell USD, as everyone and their 3rd cousin was expecting the Fed rate to remain “unhiked”.

Now here is me being greedy… I exited half my position about 2-3 minutes before the US rate decision (noon in Colorado) for about 60-70 pips. BUT I LEFT HALF MY POSITION OPEN EXPECTING TO SEE A BIG TOPSIDE REACTION! Got the opposite reaction upon news release, but with the expected number (0.25%). That move stopped me out at break even… But - I knew that the NZDUSD pair needed to quickly react to the common sentiment that the NZD rate would remain flat, and there would be a sell off of NZD, so I waited for the NZD news to hit, gave it about 2-3 minutes to settle, and then sold the NZDUSD pair for a 30-40 pip gain, rode the position to close of Aussie session, during Asian session.

A long story short — I would have an early heart attack if I continued getting into a position right before the news was released, which is what I was doing when I started this thread. I am finding that looking 1-3 sessions before major news, and tracking the sentiment of the crowds pre-news, is a bit less stress inducing, and over all more consistent.