Im a strong believer that trading news or around news events will get you nothing but losses in most cases.
Ive mentioned it in many forum Posts so far. Thats why i love to make a holiday on days which are occupied with major news events and freeze all trades and secure them with contrary positions.
Heres what happened after ECB news Release
Big Rally in Dow
Big Rally in DAX
Big bearish action in EUR/USD
… nice isnt it.
Without any reason the next hour things turned and whoever got on the Long train is now suffering losses.
I know what happened, know y it turned. y its so volatile. Im just making this thread as a friendly warning to people starting out on TRADING: Do not trade the news.
Btw im looking for good long entrees on dow jones now.
Reasons?: well, gut feeling and experience id say
Real reasons?: Indexpushing after major news releases from people with big pockets to be able to position themselves better AFTER the news release. Shockvotality to bring down the index in a more favourable price (stocks they desire to buy) in preparation of major news releases and the aftermatch of the releases. catching the contracts of the small people (COT Report name: dump money).
I believe trading the news isn’t to be ignored or avoided, it’s just a different type of trading.
On the losses mentioned above, I guess it’s the and as any other trade, risk and money management is important.
One way I like to trade the news and I’ve not done enough to prove whether it’s successful is a method I saw Richard Krivo present. 5 min chart. News hits and wait 15 mins. Sit on my hands and wait until the third bar has closed and then see where the movement looks like it’s going. In these cases I tend to put small stops on as almost any movement in the wrong direction suggests my assessment was wrong however if I’m right the profit targets are really high.
My normal trades I aim to double my risk as 1st profit point. On trading the news I aim to take first profit at 3-4 x the risk on the stop.
Just my newbie idiotic tuppence worth. I’d be interested in any other peoples approaches to news trading.
It is not so much in how you can trade this pattern, as there are a limited number of patterns related to major news events, but more the execution of trades. There were up to 3,000 transactions/ticks per minute. You could jump in with a negative slippage of (lets say) 30 pip and when in panic and try to get out you get another 30 pip against you. Stops in such movements are only relative.
so the argument is the market is soooo volatile in these situations that your stops and targets may not even work? Im still on demo so don’t have the benefit of experiencing the live account yet.
I guess its, as always with FOREX around risk management, 100 PIP stop slides to 200 as there are no trades available for your bet, whilst the reward could be 1400 as above.
I am on a beginnersforum to help new traders. Their risk management is often not up to par, so I warn them not to trade the news mostly due to the execution risk and poor risk management.
I consider doubling your risk due to high volatility (as you proposed) as bad risk management. You entered a trade with a specific risk in mind. Doubling that risk means that you are twice as riskier than when you entered the trade.
Now a lot of new traders (also with only demo experience) like to enter high leveraged trades (100:1) that means that their account is killed after 100 pip. So 1. they don’t have the room to go from 100 pip stop to a 200 pip stop, as their account is closed after 100 pip, and with 60 pip bad slippage (not even considering the pips between entry and their stop) would deminish their account 60% in one trade.
I myself (and this is a true story) lost USD 10,000 due to a news event for which I didn’ t got out of the trade in time. I normally exit before the news but was unable to this time (poor internet connection where I wa). Losing 10K in an hour after a couple of years trading hurts like hell. So I think it is better to tell new traders: Stay out until you can handle the damage of a trade that goes wrong.
Partially yes, but the main factor is that news are unpredictable. if you want to enter trades for 5 minutes and get a few pips then i consider that more like gambling then true trading. if you want to trade a more sofisticated way then you dont trade for 5-15 minutes (of coursemany people will disagree here with me but thats ok) then you have to manage moves of days. what happened on the day i posted the pictures was just a “go jump out of the window dude”-thing. The market going 200 points up and then rockbottoming 600 points onto a news event. so whoever is a conservative trader had big trouble surviving this as 600 points hits pretty much every stop loss level no matter how “loose” you trade.
if youre a short term oriented trader then you jumped on the rally of 200 points up (at some point) and made few points gain but probably didnt close the position as you wanted more, then you got killed by the 600 points minus move.
if you entered a position before the news event then you were simply a gambler who is looking in a sphere of glass to guess where the market is going to go after the news but even then you were killed if you were too greedy and didnt take the 200 points in time.
the reason for this post is simply that news events are unpredictable in pretty much every aspect of it. on unpredictable things it is pretty much impossible to make consistent profits.
Now take into consideration Toekans hints and experience seeing that you get huge slipperages of several dozen points and you cant truly enter where you actually want to enter or leave where you would like to leave… its pure “gut shooting” like trying to hit a flying bird with a curved gun that cant shoot straight. sometimes youll hit, sometimes you wont, but in the long run it is nothing you can count on making profits and live out of it.
Btw im looking for good long entrees on dow jones now.
Reasons?: well, gut feeling and experience id say
Real reasons?: Indexpushing after major news releases from people with big pockets to be able to position themselves better AFTER the news release. Shockvotality to bring down the index in a more favourable price (stocks they desire to buy) in preparation of major news releases and the aftermatch of the releases. catching the contracts of the small people (COT Report name: dump money).
After watching news releases for over 6 years, especially the big ones, you figure out how the market behaves. its always the same. I explained it in one big post 3-4 months ago here on babypips.
The big guys like to play unfair. Price pushing after good news is not rare and especially after news that are beeing expected to be good it happens very often that the price gets pushed down a few hundret points by the “pro’s” so they can buy in with more favourable prices.
There were no technical factors that made me go long (except the prevailing bigger trend), in news releases you can forget tecnical analysis, it is completely useless simply because people think theyll miss out something so they start running even after “twitter posts” after all kinds of rumors.
The first reaction is always the right reaction. When the market went up 200 points after news the news were good. that it goes back 600 points is just metagaming you must avoid. thats why i always say dont trade the news, wait till the dust and panic settles then find good spots to enter.
The fundamentals that got released that day were very bearish. some facts and changes that can not make any index go down. so any downmovement was unlogical
So not that it’s a bad thing and not wanting to dent you blatant knowledge but aren’t you effectively trading the news in the description you stated above? I mean your apply other logic to it, sentiment, etc.
Your approach is actually rather interesting to me. I love the idea of using sentiment understanding the charts getting a feel for them but as my time in front of charts is limited I’ve tried to stay well away.
When we say ‘trading the news’ it means trading the volatility that happens when the news is announced. That is dangereous, near forex suicide, for a new trader.
But when you see a reversal forming AFTER the news is announced, and price flucuations returned to normal levels, trading that can also be called trading the news. But they are different. Maybe we should look for better descriptions.
