I got a quick question and wanted to see if you can ground me and tell me why my idea is bad.
I have been looking at news and the effect they have on trading on the day they are expected. I looked at it and it seems to me most of the time news is announced the market moves at least 40 pips up or down. So why cant we just open two positions one short one long both with 10pip stop limit and 20 pip take profit. So no matter which way the news goes you will make up your loss and come out with a few pips. (Ignoring spread for simplicity)
Surely I am not the first to think of this, and it must have been disproved and is not reliable. Can someone enlighten me why? From a high level of observation it seems like a viable strategy…
You never know how news will affect the market(depending on the news). Its a game of human emotions. Some times its predictable and sometimes it’ll throw you for a loop. The last time I traded a news event]… the pair was in consolidation news came out negative to the downside and dropped 30 pips (luckily i moved my sl to break even) then the market whipped around and went over 100 pips to the upside…
The principle problem with this strat, although on paper granted a good idea is as follows. During a high impact news event price will typically ‘whip saw’ i.e. price will spike first one way and then the other. Can you manually correctly time your exits from one or both positions? Its not easy… is this really the top/ bottom of the move? Also consider the often appaulling lag from executing the close out of a trade on your platform and it being executed by your broker (slippage).