Ive come up with a system involving Buying and Selling the same currency pair ahead of a big news announcement. I have been placing a stop loss approximately half of the distance of my take profit level but also trying to place them around key psychological levels.
I have had some success recently on my demo account using this strategy but fear it may just be pot luck.
Do you guys think if this strategy was refined it could generate a consistent gain over the long term?
I never looked much into news trading but I suspect on a real account your orders will not be closed exactly when the price touches your TP or SL levels, because of all the mayhem the news creates.
Say you are long and the price goes up, everybody wants to buy and your TP will be hit fine as many people will want to buy back your closing trade.
Now if the news is bad and the price shoots down, most people will be bearish and wanting to sell, everybody is on the same side as you. It may take some time to find somebody to buy your close, basically your trade would be closed only after the down movement starts to slow down, whatever level your stop loss is. That is probably true if you trade a lot of lots, I am not sure if you trade only micro lots.
Slippage and spreads get bigger at news times, I am not sure how demo handle that.
Just my toughts, no actual experience of news trading on my side :S
I bought and sold on a live account within minutes and was down 70pips during NFP! Spreads go crazy during these times. I would open a small account and try it with a .01 lot and see. If your wrong it’s only a few bucks.
Worth a shot. Let me know how you make out.
Bill
Yeah, I think fixed spreads is a must when doing this. City Index may be a good broker for this strategy.
I have had issues with slippage as well, I might just buy some range break binary options before an announcement in order to avoid this.
Nope.It will give you 50-50 chances in long term, it short term it may look like you have an edge but that is only an illusion.It won’t help you increase the winrate, but it will help you blow your account faster.
Here is a list which strategies don’t work which i already tested, trust me i will save you months of research time if you ignore these:
-martingale
-kelly’s
-hedging
-cost average
-fixed grid (usually with bollinger bands)
-fixed TP & SL (yes, dont try to force the market to your system,instead force your system to the market)
Thanks for the advice man!
I am not endorsing any of the strategies you listed, but because they did not work for you does not mean they won’t work for others. Everyone needs to make that decision. Just pointing it out, every trader is different and what works for one may not work for another and the other way around.
That’s nonsense.If they don’t work they don’t work.It not just for me they don’t work, it is mathematically proven that objectively it doesn’t work for any user.If you want to know the reason why, i can talk about that or just google it, im sure there is enough proof out there.Im always looking at strategies objectively so it`s not only my point.
I would like an explanation why Hedging strategy doesn’t work at all? And mathematically also…
Let’s say you wish to “hedge” the EUR/USD. You go long one lot and short one lot. You can NEVER get ahead. NEVER. For every pip you gain on the long trade you will lose a pip on the short. You will effectively remain at zero. Except for the fact that you have incurred a loss due to the spread – not once, but twice. So, every time you use what is commonly called a “hedge” in forex you will always lose money. There is no way around it. It is a Leprechaun riding a unicorn in Never Never Land.
A true hedge can be quite helpful in reducing risk or even profiting (hedging with options or taking advantage of correlated or anti-correlated markets, for example).
Using one-cancels-other orders long and short (which the OP may actually be describing) can be profitable but is also not a “hedge.” Anytime someone advocates “hedging” by going long and short at the same time in the same currency pair you can safely add them to your ignore list because they haven’t a clue what they are doing. There is no mathematical way to come out ahead doing so.
True, pluse don’t forget you pay also the spread, so even if you basically have 50% of winning and you manage to get a 1:1 RR, you still end up with small reward than risk, sort of 0.9:1 with 50% win rate, thats already giving you roulette type odds.So thats like 1:1 RR with 47% win rate… not so clever now isnt it.
Plus you double the risk, what if the OCO triggers slowly and you enter both trades just in that way that you swing to the SL of both trades quickly.Thats a double loss, unlikely but you are still exposed to it in a certain degree.
And you dont want to expose yourself to unnecessary risk.Thats the evidence in a nutshell.If you want more evidence,just search on the net, you will find many, but just think about it and you can realize yourself too, why it has so many problems.
I look at a hedge from a different angle, and trying to master that…it is hedge because it does exactly that, but what differes is the approach.
When entering the trade i don’t want to put SL at 30, 40 pips away, I want to put opposite pending order at that level. So if my initial assumption was wrong i could try and get out of that bad trade and make some money along the way.
Opening immediately one long and short order is indeed stupid.
It is not non-sense as hedging can be very profitable if carried out properly. The issues is that most think hedging is done by buying 1.0 lots and selling 1.0 lots in the same currency pair at the same time. That would be moronic and if that is what you refer to as hedging I agree that it makes no sense.
Buying and selling at the same time is really stupid, but i dont think that was the point here.I think the guys were talking about pending orders or OCO orders where there is only 1 trade open at a time, but 2 pending trades were put initially.
I think those ones are moronic too, considering the fact that the spread ruins everything.It’s like the number 0 in roulette,that is why you dont have 50% there, only ~47%.
Thats the problem here too in case of pending orders.
In case of OCO orders, the slippage might put you trough unnecasarry risk.Imagine a huge candle moving 50 pips in both ways, initially going up but quickly retracting before the pending order was triggered, and the OCO could delete the other order.It would open both trades in certain cases, since we know all brokers lagg in news release periods.
So the OCO might not work so smoothly.Or if the line is too close to the candle, it doesnt necessarly have to be a news release, a tight distanced line from the current candle would do the same.
So why put yourself to unnecessary risk.If you really want 50-50% you dont have to hedge, you just decide to trade only in 1 direction, and there you go you have your true 50-50% chance where the spread wont ruin it.
…And after that you can martingale on it all you want.
…But i think you are clever and you were referring to cross currency hedge where for example you know that the EUR/USD and USD/CHF are inversly correlated.So you are pointing out to buy on E/U and sell on the U/C or vice-versa.That might work out 
This is the entire assumption as to the strategy. It should be 50:50 the RR is 1:2.
This is also not a hedging strategy we are talking about placing two oco stop entry orders outside of the range before the number with appropriate limits set.
I would say I don’t know but you should keep the following keep in mind.
All that said, best thing to do is to put it on in very very small size, you may or may not find anwsers to these points and find 20 more issues but what youre doing is specific so you will have to work it out on your own. Im not sure in retrospect if that is helpful advice!
This is a genuine question as i have been questioning the human condition a little bit after reading some posts.
Do you think people will do this and think they will make moeny?
I think you guys didnt really get what alex means. His method is theoritically possible if there is no slippage.
For example, current price is 100, long and short at same price. long with stop at 99, short with stop at 101. when news released, price move to 110, short position will be closed by triggering the stop. So you lose 1 from short and gain 10 from long.
However there is slippage in real life. The short position will not stop exactly at 101. The broker may excute the closing of short position at 110. And if the price drop immediately after reaching 110 and you dont have limit at 110 for long position or you didnt close it fast enough. You lose money.
So correct way is using gtd stop if your broker provide this. And you have to take spread and gtd stop cost into consideration. Your bet is the price will move in any direction larger than the cost and you have time to close the position before price reverse (I suggest to set limit too).
This is the same as placing oco orders outside a range. You just pay more commission and still get boned by the slippage on the first stop.
It is doable to make money from this but youre going to have to overcome a few things namely. There are people doing this at HFT funds that use dma and are very, very quick.
Didn’t read your previous reply carefully, Apologies. Execution speed wins:)
