Trading on news

Hi all, I am new to forex. Just wondering is there any trading strategy that trades on news? For example, we have bloomberg TV in front of us and once any big event happens and the direction is known, can we just buy and hold for until we reach 20 pips? I am sure the market will not be so efficient and will react in 10 seconds. It will take maybe 0.5hrs and by then we have exited and earned our 20pips.

We will trade only based on very significant news.

Have you had a look at the trading calendar tool yet (Forex Economic Calendar)? Quite helpful when trading the news.

One could take a trade in the direction of the news with pre-set TP&SL levels using a sript (quick buy / quick sell) with the MT4 platform. However I have noticed that when big news stats are released, the spread is quite high, which could mess one around. I dont trade the news as ive tested it in the past and been burned, personally for me, its quite risky and a bit dangerous. In saying that, trading is risky, one just has to manage the risk adequately.

Thanks for the insight.

Let say BOJ suddenly announced some policy which may cause Yen to appreciate at 8am exact. If we trade using data from this site, it will be 8.01 am before the webmaster upload the news. But if we are on bloomberg TV and once the chairman of BOJ said the word “we will hike interest”, our quick buy will immediately start and maybe the spread will not be large at all. Any opinion? I am a beginner at forex but I know the equity market quite well. I know we cannot do it for equity as usually they will halt trading before announcing major news/announce after market close.

No. Most of the time the reaction is to fast. You really want to be in the trade before the release, having done your research beforehand. Alternatively, if you can’t figure out what the direction will be beforehand, then wait for a retracement of the initial move before entering in the direction of the fundamental bias.

I know as I can imagine many big quant house capturing this kind of pips. what do you mean by fast? Is it 1sec, 10sec or 1min? I think yesterday afternoon JPY climbed for 30 mins before falling.

Thanks for clearing my doubt. The retracement is dangerous IMO as you do not know know for sure when it will happen. But the first response is confirmed.

A huge chunk of my trading is news-based. Your biggest problem is slippage (you have to pay alot more than normal just to get in the trade during the release), whipsaws (where price violently goes in both directions) and timing (price is moving faster than you can even enter your order in).

If you can figure out a strategy for yourself that works, than good for you. I believe it’s possible, and I’ve been doing it for ~2 years now. Still consistently adapting my strategy though, its never static.

Here is an example of what I mean:

CNY Trade Balance � aspiringtwenty5

I went through an entire year’s worth of technical data to look for clues/hints/signs of a pattern, and I pay attention to every little thing that happens in the market and write it down. I’m sure if you run with your data and get some real homework done, you will probably find what you are looking for.

I don’t know if posting outside links is allowed, so if it isn’t I’ll take it down.

You can always trade the news fade. A news release can cause the market to quickly get over-extended beyond the actual impact of whatever news came out. Here is a brief article which you may find helpful: http://tradeforexnews.net/trade-forex-news-strategy-4-fading-news/

I think DailyFX has a few articles on the same thing Forex News, FX Trading, Strategies, & Market Analysis @ DailyFX.

Actually entering on a retracement off the initial move is pretty reliable IF the initial move agrees with the fundamental direction of the release. For instance lets say you are trading the Aussie unemployment rate, it comes out worse then expected and Aussie drops 50 pips in the first 30 seconds after the release. Often times it will retrace at least half of those pips, and you can re enter short with a fair amount of confidence because you have the fundamental bearish pressure of the negative release and you also have the initial bearish movement as confirmation.

If you try entering a trade as soon as the numbers are released, like the previous poster mentioned, you will usually experience some nasty slippage and your trade will get filled at a pretty bad price. As a retailer you have to know your limits, and this is one of them.

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Hi are you the one who post in hardwarezone mentioned about a friend who got holy grail in trading?

The market will react fast because there are professional traders who trade such strategy as you mention. If you miss the moment wait for a pull back and trade the direction it went on release of the news.