When a person walks into, let’s say, an average Las Vegas Strip casino, that person is provided a number of gaming opportunities.
Some of those games are played against the house and some not.
Slot Machines, Blackjack, Craps, Big 6 and Roulette, the player is going against the house. The house sets the odds in the house favor and these odds are hard set - in the long run, the house will win.
But, the casino offers up a couple of card games where the player is pitting his skills against another player. One of these games is Poker. The house will make its money when the dealer drags a percentage of the pot and drops it in the drop box - the dealer does not play.
FOREX is very similar in that the trader is not going against his broker, he is trading against other traders and their skill, much like a skilled poker payer. The broker makes his money with the “spread”, not by beating the trader.
The skill of the FOREX trader is in knowing his odds, or, the probabilities in any given trading situation, whether a technical trader or fundamental trader.
Like in Poker where the skilled player will know the mental weaknesses of his opponents, the skilled FOREX trader must know the mental weaknesses of the majority of other traders. If not - there is trouble.
Another US new release that may be profitable to trade is the USD Core Retail Sales report and Retail Sales report coming out tomorrow, Monday the 16 of April at 8:30 AM ET (2012).
Since these 2 reports are most favorable for a trade when they are not in conflict - not often is there an opportunity. But, the Core report is often the strongest of the 2. Also, if an additional important US report is coming out at the same time, like the unemployment claims report, well, all bets are off.
Just to show you how good things can be when these reports are released and they are not in conflict, this is what happened on Thursday, the 12th of January of this year (2012). Even with additional conflicting news releases.
With the “actual” more than 0.5% below the “forecast” for Core report and 0.2% for the Retail report, traders evidently took this as bad for the US economy and for the US Dollar, so they sold.
I was watching 7 difference USD related currency pairs and 5 sold the US Dollar within a short amount of time.
The 2 best performing currency pairs were the EUR/USD and the USD/CHF.
The EUR/USD moved down for about 2 minutes (buying the USD) about 21 PIPS - (wrong direction), the broker spread normally returns to normal within the 1st minute of the news release. Then it ranged for about 8 minutes, after that the market moved up for 32 minutes about 68 PIPS. So a fair “scalp” or 2 after about 10 minutes could be had.
The market moved up for the 1st 8 minutes about 16 PIPS - (wrong direction), then moved down next 34 minutes (right direction), about 49 PIPS.
Possible good “scalps”.
I am so glad I found this trend. After trading for the past 7 months, looking back, most of my winnings are from trading the News releases. I usually trade only US news releases but now I am including UK and Europe as well. I am more comfortable and confident trading this method and , most of the time, the odds are their for me to take :). I will start looking at other currency pairs that you mention here on this trend and start watching them and find the pattern.
All in all what a great trend! I finally found something for me and something to add on to my journey as a trader. I will be following your post just like a follow other post like ICT.
You have a really good insight about your entry trade and a tight stop of 15 to 20 pips. My question is, when do you exit the trade to take your winnings? Do you use any indicator such as stochastic, RSI, SMA, any Support/ Resistance level or FIB as to when to get out of the trade to avoid reversal? Do you usually wait until New York Open (NYO) and or London Close (LC) to close the trade if it is a big moved? Thanks.
I have tried using “conventional” FOREX indicators for an exit strategy, and I felt I was back to using kind of a guessing game again. I was not comfortable.
I feel that exit strategies are as important as the entry strategy, maybe more so. The thing is, I have not yet attempted an ”odds” study of optimal exits.
I was asked this very same question just the other day on another forum - here is the answer I gave:
“Spread can be a problem and a reliable exit strategy is important. And I believe the exit can be brought under control, somewhat, by considering the following:
The period when most traders are active.
The country releasing the report.
The popularity of the news report.
The popularity of the currency pair being traded.
What one needs to know is what are the odds for each of the above.
For example - when an important Australian news report is released, the market will move as predicted far better and longer then that of a US or British report. This also applies, not quite as often, when a New Zealand report is released. Of course, knowing which currency pairs perform the best helps.”
In the near future I will go back over my records for an idea.
It has been said from other post and also from the books I’ve read that using trailing stop is a good strategy while on the trend (up or down). I tried to use this but I just couldn’t figure it out, so I tried to move my stop instead while the trend is moving in my favor (or maybe this the trailing stop that they call it? ). I initially move my stop around +20 pips so I can be sure that I get out of the trade with 20 pips gain. Then I keep moving it while it’s moving up or down. I sometimes wait for LC to exit out the trade. Sometimes it works but sometimes it doesn’t due to reversal.
I am still learning how to properly enter the news releases and how to properly exit out of the trade but I guess their is nothing perfect. As long as I can get pips on that trade (no matter how much it is ) I will be happy. Tomorrow news release is for Europe (DE and EM) PMI Mfg./Index Flash. I haven’t trade these news before but I watch it last month and it moved about 100 pips down. Will see how it will played out tomorrow.
I believe that trailing stops is a good strategy - I do not use trailing stops because I am more comfortable with “take the money and run” theory, thus leaving me with another opportunity to “scalp” more trades.
That’s just me.
Not every traders use the trailing stops so they do not get the advantage of their profits to the fullest. But those who make use of them are the one who can make more profits from the same orders when trading the news.
Here is a European economic news report being released tomorrow, Monday the 7th of May, 2012.
The German Factory Orders Month over Month report at 6:00 AM ET has proven to be a good opportunity for a “scalp” trade or 2 - when conditions are right.
Tomorrows “forecast” is a 0.5 %, if the difference between the “actual” and the “forecast” is greater than 1.3%, either above or below, the market should have a substantial move.
Canada is releasing the monthly Employment Change and Unemployment Rate tomorrow the 11th of May, 2012. If these come out either bad for Canada or good for Canada there should be a good market movement. Especially if the Employment Change is at least 20K.
If you plan a trade, I recommend staying away from the USD, the US is releasing the Producer Price Index report at the same time.
I did trade these yesterday under AUD/CAD, though my broker has 4 spread, vs. EUR/CAD (5 spread). I was also watching USD/CAD and it did sell off as well. It was a good day yesterday.
So far, I am only trading 1 pair because I am still building my capital. I am currently trading live in mini account. Doing it in Demo is not the same feeling as doing it live. I am planning to trade 2 pairs in my demo next time just to get a feel for it.
Quick question for you: How many pairs do you usually trade when there is a big move (just like yesterday)?
Tomorrow morning, Tuesday the 22nd of May, 2012, the National Association of Realtors is releasing the Existing Home Sales at 10:00 AM ET.
In the past this has been a good report for a trade if the conditions are right.
Heads up…if you plan to trade the Australian cash rate tonight, be aware there is also a rate statement.
That rate statement can cause problems if it is contrary to the cash rate.