Counter Spike Trading - Anyone try it like this? | Forex Factory

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Counter Spike Trading - Anyone try it like this?

  • #1
  • First Post: Edited 7:19am Jun 19, 2007 7:15am | Edited 7:19am
Anyone ever looked at this:

When a news release comes out and there is a small deviation between the actual vs expected # or no deviation, and the market still moves, try taking the opposite position of the spike? Look at today’s example, the CAD CPI Core. No deviation, yet the price still managed to go up 22 pips, but immediately came back down. Has anyone tested this looking back to see if there is an immediate retrace during small to no deviations?

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  • #2
  • Jun 19, 2007 7:40am Jun 19, 2007 7:40am
Quoting jeffreytp
Anyone ever looked at this:

When a news release comes out and there is a small deviation between the actual vs expected # or no deviation, and the market still moves, try taking the opposite position of the spike? Look at today’s example, the CAD CPI Core. No deviation, yet the price still managed to go up 22 pips, but immediately came back down. Has anyone tested this looking back to see if there is an immediate retrace during small to no deviations?

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Hi
I don't test this method but it is good idea...
Do you think where is the best point for opposite position?

thanks
  • #3
  • Jun 19, 2007 7:41am Jun 19, 2007 7:41am
reversed, i thinking to follow the movement but the price just goes back... quite often
  • #4
  • Jun 19, 2007 10:05am Jun 19, 2007 10:05am
problem is the spread, even broker saying they have fixed spread, you will probably not be able to buy/sell the spike without a slippage of 20 pips maybe
  • #5
  • Jun 19, 2007 10:45am Jun 19, 2007 10:45am
to be frank, that is a dumb idea. That is like walking in the direction of a sandstorm instead of going with it
100% of traders are losers. Just that some win more than they lose!
  • #6
  • Jun 19, 2007 11:06am Jun 19, 2007 11:06am
Quoting jeffreytp
Anyone ever looked at this:

When a news release comes out and there is a small deviation between the actual vs expected # or no deviation, and the market still moves, try taking the opposite position of the spike? Look at today’s example, the CAD CPI Core. No deviation, yet the price still managed to go up 22 pips, but immediately came back down. Has anyone tested this looking back to see if there is an immediate retrace during small to no deviations?

Attachment
Hey Jeff,

This has a great chance of not working because of the spread after a news moving event, I notice this is a 1 min chart so not a China mans chance of getting filled at a good price 1 min after the news. If you where really keen to ignore my opinion and try and scalp a few pips I would suggest maybe shorting after that nice hanging man I see after the initial 1 min candle. BTW Loonie aint a great pair to fade, try Eur/USD next time, a red factory is best.
The best way to fade a news release in my opinion is to wait atleast 5 mins after the news and buy/sell when it tests the reaction high/low (Spike) again.

What did that guy Mr. Demark say about walking into a sand-storm?? Whatever it was its not totally true, because I often fade after a NME and make more than I lose, So there you go.... put that in your pipe and smoke it.


All my Love,

boycie.
  • #7
  • Jun 19, 2007 2:08pm Jun 19, 2007 2:08pm
What you are describing here is usually called "fading the spike". The way it works is to wait for the spike to boom up and hit a significant level of support/resistance from a technical point of view (a trendline, a previous swing high/low, etc) and hop into the position as soon as you see the spike bouncing off that level. It works better if traded in the direction of the overall trend.

In my opinion it's one of the most difficult ways of trading. I have tried it and could never achieve sustained success: it was hit or miss basically. But I do know that some people trade the spike fade out.
  • #8
  • Jun 19, 2007 4:14pm Jun 19, 2007 4:14pm
Quoting boycie
Hey Jeff,

This has a great chance of not working because of the spread after a news moving event, I notice this is a 1 min chart so not a China mans chance of getting filled at a good price 1 min after the news. If you where really keen to ignore my opinion and try and scalp a few pips I would suggest maybe shorting after that nice hanging man I see after the initial 1 min candle. BTW Loonie aint a great pair to fade, try Eur/USD next time, a red factory is best.
The best way to fade a news release in my opinion is to wait atleast 5 mins after the news and buy/sell when it tests the reaction high/low (Spike) again.

What did that guy Mr. Demark say about walking into a sand-storm?? Whatever it was its not totally true, because I often fade after a NME and make more than I lose, So there you go.... put that in your pipe and smoke it.


All my Love,

boycie.
Yes, Not totally true. As the above post says it works well whenever news provides a cheaper buy for an uptrend (or vice versa)
100% of traders are losers. Just that some win more than they lose!
  • #9
  • Jun 21, 2007 8:24am Jun 21, 2007 8:24am
Fading the spike is possible but it all depends on the circumstances.

I would only fade:

1. In the direction of the overall trend.
2. When economic number is is very close to consensus.
3. If there is a James16 price pivot that price will bounce off.
4. If announcement has already been "priced in" to the market.

Saying this, I'm great at giving advice, I just have problems following it
If it's too good to be true, it probably is.
  • #10
  • Jun 21, 2007 2:31pm Jun 21, 2007 2:31pm
Bad Idea.... the spikes are caused by liquidity being pull out, making the pip intervals impossible to trade.

I wrote an EA that trades like this and it only works on curriency pairs that in theory should not be effected by the news release. for example JPY intrest rate statement should not effect the AUD, but last time it caused the AUD to Spike 18 pips, this spike happened and retraced in 8 minutes. the EA cought this spike but only got 10 pips, due to TP.

the reason this method may work long term is because there is no pull out in liquidity on the AUD prior to the JPY release. But there is a huge pull on the JPY which causes the JPY to spike. Making trading the JPY during this release pretty hard to do and counter trading it very dangerous.
Keep it simple stoopid....
  • #11
  • Jun 21, 2007 3:16pm Jun 21, 2007 3:16pm
there was some guy on this forum who made a pretty good observation similar to this one..

it had to do with the 60 MA on the 5 min.. i think.. anyone know what im talking about?
  • #12
  • Jun 23, 2007 4:00pm Jun 23, 2007 4:00pm
Trading spikes is very dependent on the particularities of the market you are looking at at the moment, so it's hard to draw up workable general approaches. But that being said, here goes....
The first thing to do is get familiar with the pathology of spikes. They have a beginning (while shoot from the hip traders jump on the headlines) a middle (when more deliberate traders digest the news or wait for orders from higher up), and an end, when folks run out of money and realize they may have spent too much.

Fading the spike depends on 2 things - realizing when that end moment hits, and estimating how much of a hangover the spike-drivers are going to have. And of course, limiting your risk.

I've attached a typical chart below of a spike that I took awhile back; the indicator is just a modernization of a least-squares regression line (a Kalman Filter), with standard deviation lines added. The filter has since been upgraded, but the picture serves for now.

IIRC, the news was realeased on the 1/4 hour, and it took a few minutes for it to sink in. Then it got jumped on - as a guideline note that it quickly exceed the 2 deviation upper line, which (under normal trading should contain ~95% of all trades). Then the data slows as that deep dark feeling that maybe I over bet the farm sinks in, while a few stragglers keep hoping and bidding it higher; they give up, and the data starts sinking.

The fact that it has started sinking is important if you want to contra-trade news (or any other kind of spike), it (or a few pips up) is where you have to put your fundamental stoploss, as it's perfectly possible that the spike-drivers are just stopping to regroup.

When you put your order in though is pretty much a matter of your risk tolerance - I tend to do this when the retrace is strong enough to start caving in the downside 2 deviation line (using this kind of filter). Getting out for me then is a matter of the retrace hitting the stoploss (which should be trailed as smoothly as possible), or when the data starts turning parallel to the previous trend, indicating the info has been digested, and no one really cares about it anymore).

This one wasn't particularly successful - just a handful of pips; the reason (IIRC) being the Aud/USD was in a strong uptrend, so there wasn't much market interest in countering the spike...




http://gammarat.com/Forex/2007/05/au..._virginity.gif
  • #13
  • Apr 8, 2009 6:31am Apr 8, 2009 6:31am
Usually spikes caused due to small news are low volume moves and the price soon comes back

But when u are trading important news like bank interest rates, etc , the price will not come back .

Be careful .
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  • #14
  • Apr 8, 2009 6:52am Apr 8, 2009 6:52am
Quoting jeffreytp
Anyone ever looked at this:

When a news release comes out and there is a small deviation between the actual vs expected # or no deviation, and the market still moves, try taking the opposite position of the spike? Look at today’s example, the CAD CPI Core. No deviation, yet the price still managed to go up 22 pips, but immediately came back down. Has anyone tested this looking back to see if there is an immediate retrace during small to no deviations?

Attachment

Try it without the 'news', i.e. look for spike's (peaks + troughs) during regular trading.

H. Rearden
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  • #15
  • Last Post: Jun 1, 2009 7:53pm Jun 1, 2009 7:53pm
Quoting jeffreytp
Anyone ever looked at this:

When a news release comes out and there is a small deviation between the actual vs expected # or no deviation, and the market still moves, try taking the opposite position of the spike? Look at today’s example, the CAD CPI Core. No deviation, yet the price still managed to go up 22 pips, but immediately came back down. Has anyone tested this looking back to see if there is an immediate retrace during small to no deviations?

Attachment
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