Pre-news sentiment - an alternative to news straddle?

I have been testing Henry Liu's Currency News Trading (CNT) EA with both a demo account on MT4 and a live account with IG index on their own platform. The CNT EA has its benefits and can be tweaked, but slippage on the live platform where straddles have to be placed manually is a problem that I am seeking to overcome by placing trades prior to the news release. This means reading, and sometimes trading, the pre-news sentiment for predicting the direction of the news spike. I have recently retired and now have the time to pursue and develop this trading system, not as an EA but as a system that integrates intuition, speedy reactions and sound price action signals. As a newbie I am hoping to also learn how to make best use of the excellent facilities provided by our hosts here at Forex Factory. So, if I make mistakes in the use of the forums then please forgive my naivete. I will be explaining my strategy in detail in good time. Meanwhile results can be seen on forthcoming charts on actual trades. It may be helpful to study news trading principles in the School of Pipsology.

I've often wondered about the practicality of retail traders trading news events. It sounds rather simple and at first blush only requires only nimble fingers. I will follow along to see where this road leads. Hopefully, it is not off a cliff!

Welcome aboard jls. Our next news release to be traded is US new home sales. Its on the Forex calendar for 15.00 UK time. I will trade it and we'll see what happens.

Why don't you consider another broker, with less or no slippage on the live platform? Just askin' ....

Slippage is a problem with all brokers when volatility is high and many traders orders are being processed all at once, which is what happens at news times. So it makes no difference which broker you are with. It's like a traffic bottleneck. What I am aiming for is to enter the trade in the correct direction therefore avoiding slippage.

looking forward for your progress, I m in with UsdChf trade on long side. I too see PA bullish pre-news, lets hope it flies high with NFP release. I will see few minutes before NFP to decide whether to keep it open or close.

Cheers.

I am looking for a consensus on all USD pairs, but today there is none. USD/JPY has been in a strong up-trend since Friday 18th Oct with the JPY still showing weakness. Conversely AUD/USD has been trending up since this morning but may have reached resistance. Cable is looking bullish and has just broken its bear channel. The EUR and CHF are synchronised in a sideways range. Traders have been buying AUD and NZD against USD and selling JPY against USD. Where I did see a bullish USD half an hour ago I have just cancelled all my positions because the only agreement is sideways ranging. I will therefore leave it until 13.05 GMT to see if there is agreement with all pairs. In the meantime in my opinion your USD/CHF is a bit of a gamble. Look at the 20 MA's on the attached chart.

Those 20 MA's were the true pre-news sentiment indicators. Opening positions in synch with those MA's resulted in this on the attached chart.

Hi Tellboy

Check out these guys here. They have been trading this way for some time with great results. Today was an exceptional day for them. And like the thread owner likes putting it, IT WAS ANOTHER SUCCESSFUL BANK ROBBERY

Thanks johNal. I saw that and am keen to get in on the act.

The two charts shown above are illustrations of US new home sales pre-news sentiment and post-news spike. They clearly demonstrate that the pre-news sentiment as represented by the 20 MA was an accurate indicator of the direction of the coming news spike in this particular case, and this is a hypothesis that needs to be tested.

Using a scientific experiment the research questions are as follows:

1. Is the 5M 20MA a reliable indicator for the direction of a news release spike?
2. Are there differences in pre-news sentiment for UK news releases and US news releases?

These hypotheses are to be tested with the aid of an MT4 demo account which is linked to this thread and by posting a pre-news and post-news chart for each news release tested.

The MT4 demo explorer attached to this thread is in deficit, so we shall be looking to see how long it takes for the account to move into profit.

The next news release to be tested is US pending home sales at 14.00 GMT on Monday 28/10/13.

US pending home sales was predicted 0.5% up from the previous -1.6%. From 11 am GMT the USD showed strength against all other currencies which is evidenced by the 20 MA on all 5M charts shown below. Actual news released was down at -5.6 which created a very small negative spike for USD, but with no significant movement.

The outcome of this test therefore is that pre-news sentiment is good for taking profits prior to the news. Using the pre-news sentiment as an indicator for positioning just prior to the news had a negative outcome.



The next news release to be tested is US Retail Sales at 8.30 EST (12.30 GMT).

Pre-news sentiment leading up to the news release on US core retail sales, PPI and retail sales was USD bullish from 10.30, 11.00 am with the exception of CAD. Entering at about 11.00 am would have realised a good return. PA reversed at 12.00 when trades are closed. The conflicting outcome of three reports created confusion and there was no news spike. The chart shows pre-news sentiment and the result of the news releases.

This exercise shows that following pre-news sentiment has its benefits, but it is wise to exit half an hour prior to the release.

US ADP non-farm employment change 12.15 GMT and core CPI 12.30 GMT. Weak USD but no consensus. No trade.

Another example of when NOT to trade. Here is the chart for US employment change at 12.30 GMT 31/10/13. No consensus. USD is weak but EUR is weaker. The neutral release created no spike with the exception of CAD (bottom right chart) which was completely unpredictable.

UK construction PMI gave a good opportunity to catch a few pips on all pairs. A weak USD dominated the market which influenced the strong EUR against GBP. However, the 20 MA on GBP/USD and JPY gave good indications for a positive spike on the news release.

UK Services PMI came out at 62.5 against a forecast of 60.4. Pre-news sentiment is shown on the chart by the 20 MA on all pairs with the exception of JPY due to a strong Yen. The consensus on all other MA's provided a good indication of the news release spike which did not start to retrace for ten minutes.

20 MA's on the 5M chart gave good indications for the move which was bullish for USD counter to forecast. Lesson = go with 20 MA indications.

Neutral news on UK Manufacturing PMI caused a whipsaw double spike which took out stop losses. However, strong bullish pre-news sentiment for GBP gave good profits that were closed just prior to the news release. GBP/USD paved the way when price crossed the 20 MA. Long entries on GBP/USD, JPY and CHF with short trade on EUR gave good profits of about 20 pips each. This is a good example of the advantages of trading pre-news sentiment instead of the actual news itself.

ECB surprised us with a 25% interest rate today which had an immediate impact on all USD pairs. The interesting thing is that all 5M 20 MA's gave a good indication of the direction of the spike. See the results below and look at the colour of the MA's - red for short and green for long.