Trading the news

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I was wondering if there was any interest in people learning how to trade news and comments from central bankers, politicians etc. Although this can be very volatile and scary(at first) it also can be very profitable over the long run if traded properly.

First let me tell you a bit about myself. I’m 28 and i work for a fund that trades fixed income mostly bunds and gilts( 10 yr german and uk government debt), i’ve been here for about 3 years. i used to visit this website on a daily basis before my bid to become a trader and thanks to the knowledge i picked up here and other places i was able to get a job, not trading fx though but fixed income. I decided to start this thread based on the advice of another member and maybe add something new that isn’t on the forum.

However there are some initial barriers to trading news releases and those are platform execution speed and how fast you get the news released. To be honest theres not much of an advantage in trading releases for most of you, because it will be a case of when you getting in, im getting out. Your execution speed will be too slow. If you trade release way outside of the analysts ranges your odds will go up.

Where i think the best advantage for most of you is trading central banker comments or press conferences where if theres not a prepared text you’ll be hearing what everyone hears AT the same time.

If theres any interest in this thread then we’ll do some platform tests and data feed test just so i can see the delay time between when i get news and comments on reuters/bloomberg and when you guys get it. This way we can form a plan of attack.

Let me know if there’s anything you want me to included or go over.

I’ve got a few ideas as to where ill start from. But be warned, your going to have to know your fundamentals , e.g, what’s EFSF & ESM etc…There’ll be a lot of reading headlines and analysis but it will pay of in the end.

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Maybe we can start with UK GDP tomorrow (important number) ill post some analyst ranges before hand so you can tell whats outside the range and how the market reacts.

Note taking is really important when trading fundamentals. What happened before release and what was the move on release etc…

Ill give you my plan just before the number and we can see how it plays out.

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Heyy man you stole my thread. :wink: I was thinking to start my own thread about this topic.
it’s ok i love news trading and i think that it’s my good skill that i trade the news properly and have a good risk management.Well,i admit that news trading is really scary but it’s really rewarding i mean that we can get a very good risk:reward ratio in news trading.The only skill we need to develop in ourselves that how to prevent losses while trading the news.News trading can sometimes be wayyy more rewarding than the normal trading.Although,it’s also really risky but if you develop a special psychi in yourself than you’ll be really profitable in the long run.My whole profit in my career consists 70% of that profit which is got from news trading that’s why i love this point of forex.

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This will be an interesting discussion. It will be great to gain some insights into news trading… I have always avoided these periods.

Great Stuff…!

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Here is my own review about the today’s UK GDP news:
The things which goes in the favor of the better than forecast GDP report are their Industrial production and manufacturing production which we can see came in better than expected this month.Industrial production contributes a big part in the GDP of the country and it came at 0.9% vs consenses -0.2%.On the other hand,NIESR GDP estimate came at -0.2% which is favoring the contraction in the GDP of the country.
If the actual report come within expectation or less than forecast than the recession of the UK will be confirmed and it could lead to a huge pound sell-off.
If the report come in better than expected than we can guess that the UK is heading out of the recession and it will lead the traders to buy GBP to form a strong bullish rally.
Now let’s take a look at the previous month’s price action when the GDP report was released:
On 25th April 2012 their last preliminary GDP release was expected to come at 0.1%.When the actual news was released it missed expectation,came at -0.2% and it made the traders to start thinking about the technical recession of the country and i am sure that you can expect that what would have happened.
Check out the image below.
Price dropped like a bomb after the actual release.
Today GDP report is expected to come at 08:30 GMT.Analysts think that the UK economy contracted by 0.2% if that happens than the UK recession will be confirmed and the GBP will be heading towards the south.
Whatever happens,pay close attention to the charts and make sure that you have set your stops properly.Remember to take good risk management while trading the news.
Good luck to ya,traders!

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So what kind of entry might you make, or will you wait until things settle down after the announcement.?

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Hi kagein i hope you won’t mind for sharing my thoughts on your thread.

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Morning, quite open for me…

Ok i dont mind if anyone shares their thoughts thats what a forum is for.

JJ6845616 your analysis seems fine but what i think you need to focus on is what are the implications if we get a surprise weak number or a strong number. Traders arent so bothered with the fact of UK been in or out of a recession in a sense( thats for the news outlets.) What people focus more time on is what will be the policy response of the BoE. Given the last MPC Minutes indicated that they discussed a rate cut, If we get a bad number, expectations of a rate cut will increase. i.e. sell off in the cable.

To actually trade the number you’ll need a fast execution platform which most of you (im guessing) dont have. Even then, your always be slower than the computers. So i want to form a plan over time which will help you trade numbers on the platforms you use but more importantly…trade comments (this is where the real money is made).

For starters… whats market sentiment? That doesnt mean what analyst think it is in reports. How has cable reacted 2 hrs,1hr etc… before release. GDP is released by the ONS and every ONS figure is leaked. So if you see cable getting hit hard before release with no other reason. Then you know 9/10 its gonna be a weaker number.

Ill update u guys again before release… Ill be busy for the next hour cash open in 2 mins

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ECB NOWOTNY Sees arguments for giving esm a banking license… Euro up 50 ticks in 10 sec…

I didnt trade that but some of my colleagues did. You can see by mastering comments and mastering your fundamental knowledge can make you a lot of money very quickly.

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Ok down to business for this number. Below is a screenshot from bloomberg T, it shows the analyst range of forcasts the important thing to notice is the high and low of the ranges

So from this we notice that a complete surprise is outside this range and will offer you a higher probability trade.

So what has cable done so far. It has about a 40 ticks than an hour ago…So is this people thinking GDP will be a surprise higher number? I would say no…I also moniter the Short Sterling and the Gilt( 10 points for anyone that can tell me what they are…) which are both mid range which makes me think cable move is mostly risk on, or short covering).

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Actually trading the news means trading the surprises.I’m up and ready for any surprise and i hope to make some good pips.

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What news outlet do you use?

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Quiet Time now… GDP came out -0.7 blew my theory out the water. cable had a decent move most of which was computers, which didnt leave much cream for the rest lol. I traded the Short sterling which had a 4 tick move(not much considering, how far out the range.)

I was thinking maybe i should focus on giving a very in depth run down of how to trade ECB press conference and FOMC(key words to look out for and any changes in statement)

Theres point in discussing figure releases as you really dont have much of an opportunity

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Bloomberg flashy red headline “[B]Draghi ecb will do whatever needed to preserve euro[/B]” euro rallied 150 pips. This is something that everyone could have traded because before it came out on bloomberg he said it live on cnbc… so you could have got the best trade entry before alot of market participants, it didnt really move until it was released on bloomberg. Personally i didnt trade the euro, i sold the german bund, not with with conviction though but based on the reactions to notwony comments yesterday the market is looking for any reason to rally…

I think i should make this point also…trading intra day is very hard business…is a very hard business the odds are stacked against you, especially if you have tight stops. I would recommend most of you to take longer term positions…So wouldnt get chopped and turned by market moving news…

Also if you know your fundamentals and you know what the underlying market drivers at the time are you can make alot of money in a very short space of time. I would say in my case 70% comes from fundamental trades and 30% from technical but thats just the type of trader i am.

There’s a lot of threads about various methods, most of them destined to lose money but not enough on the actual drivers of price action.

My boss always says technicals are the noise between fundamentals…something he read somewhere(probably a cereal box)

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When trading on a day to day basis to be profitable we must be making more money on the trades we win than the trades we lose over the long term. Also when putting on a technical trade we wouldnt want to risk too much of our capital per trade because no matter how sure we are of a setup the market might not share your view and hence stop you out.

Trading comments and fundamentals however are slightly different in the regard that if a market moving comment is made, the market [B]WILL[/B] move. I think i should make this point again so it sinks in…

[I]If a market moving comment is made, the market [B]WILL[/B] move.[/I]

Sounds obvious but its an important point, in the trading world of probability and averages you have certainty.

Let’s discuss some hypothetical scenarios:

  1. Your sitting in front of your trading screen at 10:00:00 am, eur/usd is trading 1.2300 and Merkel begins talking, your watching on cnbc.

At 10:01:00 am Merkel announces Germany will leave the euro in favour of their old currency the deutsche mark. (This announcement was not expected)

10:01:10 am euro trades 1.2250
10:01:30 am euro trades 1.2150
10:02:00 am euro trades 1.2000 (example… obviously could trade differently).

So in the first minute after the announcement euro is 300 pips lower, with much more downside potential.

You hear this comment, you know 100% that the euro will trade lower (It’s not gonna go up on a comment like that is it ). So in the trading world of probabilities and averages you have a scenario of, if i sell it, i [B]WILL[/B] make money. On these certain trades you should be willing to risk more than you would on technical trade that could or couldn’t work.

So in this example you would be onside 300 pips in the space of 1 minute with bigger than your average trading size.

This is an extreme scenario(that could happen :53: ) but there are many less obvious but profitable comments and events that happen all the time.

It all sounds easy but the trick is to know which comments exactly are market movers and which are duds and make a buy/sell decision in a split second. That takes practice and more importantly KNOWLEDGE.

If Draghi says were going to restart the SMP programme and you dont know what that is, you’ll have a front row seat in watching the market run away from you.

So what do you do??? [B]READ[/B] everything. Know what everything means and its implications.

Read Reuters, FT or bloomberg at the end of every day (FT Alphaville is good) If you dont understand something, find out what it means. Ask here, if i know ill tell you.

The blog Zerohedge is good as well(funny at times). Read it.

Knowledge is the first part of your journey. The next is formulating a plan and going over it many times. So if it does happen, react as if on auto pilot. End result…PIPS…i guarantee you.

To really give yourself the best chance at trading comments you’ll really need a bloomberg terminal or a reuters, ideally both. The reality i guess for you guys is that these services are just too expensive (bloomberg costs $1800 PER month.) The next best alternative is to use a squawk service (who read out news as it comes out on the wires.) There are a few i know like RAN, FC Market and ITC.

If these service are still out of your price range, you’ll have to trade press conferences etc that are aired on TV(still alot of money to be made this way.)

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So the dust has settled and what do we have…An over reaction in my opinion i initially thought the euro was good for maybe 30 pips on that comment, if that, a few of my colleagues thought it was a big statement hence took a lot cream from that…I didnt and to be honest didnt make much.

Already there are reports of ECB officials talking down Mr. Draghi’s comments…

It will be interesting noting the open interest in the equity indices tomorrow, maybe we can tell whether todays moves where from fresh longs entering the market or from short covering because by now every man and his dog must have a long term short tucked away.

Citi On Draghi: Expect Nothing From The ECB Before The ESM Is Active (In September At The Earliest) | ZeroHedge

So today Draghi gave the market a nod and a wink and everyone got excited. Problem is now something has to happen to live up to the markets expectation and he’s got a week max (till ECB press conference ) before all hope fades again and we’re trading right back down to where we were at the start of the day.

So now we have to be especially watchfully for any sort of comment which gives more details on what the ECB is willing to do to curb the rise in spanish and italian debt yields. If nothing is said between now and ECB press conference expect the market to be scrutinising his every word(not that it doesnt do that any way)

I’ll go over a detailed ECB plan before thursday. In the mean time you guys should familiarise yourself with the statement he reads out(old statements on ecb website) on and some scenarios of what they could do and what i think the initial reaction of the market will be…

the more work you do in preparing yourself for every scenario the more money you’ll make and you wont be like a rabbit in headlights if anything you’ve planned for happens.

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I think pending orders and hedging strategies are the best for news trading.

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I strongly disagree with this statement…Before any number the market thins out, now lets say you have a bid 20 pips from where market is trading and an offer 20 pips below. You could be caught out on a blip where your filled on your bid then immediately on your offer taking a 40 pip hit before figure is out.

I’ve seen it happen before…so beware

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09:45 BUNDESBANK: HASN’T CHANGED VIEW ON ECB BUYING GOVERNMENT BONDS- Dow Jones

eur/usd off 15 pips at time of writing this.

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I have been using this strategy for 2 years.I place pending orders 2-3 mins before the news release.The case which you are pointing out is the worst case and it happens only 1 out of 10 time.Why are u ignoring the risk:reward ration of this strategy ?Sometimes news trading gives you upto 1:4 risk:reward and i have personally tested it and that’s why news trading is m favorite.Trust me,in ylong run you’ll always be highly profitable in the long run.What you need is a lot f experience,strong fundamental analysis and proper risk management.