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Tell me about different methods and issues of news trading

  • Post #1
  • Quote
  • First Post: Jan 12, 2007 7:12pm Jan 12, 2007 7:12pm
I've recently been getting more into news trading and I've decided I need to familiarize myself more with the different methods and issues to trading the news. I've seen a bunch of things mentioned here but never a formal explanation.

The two different methods of trading the news I'm familiar with are straddling and fading. Straddling of course is putting two limit orders on each side of the price in order to catch the spike caused by the news release. Fading (according to Investopedia) involves entering a position at the top or bottom of a spike in hopes that the spike will reverse.

I don't use either of these methods, but I've considered using straddles. Using straddles makes me really nervous because my broker typically widens spreads to 20 points during news releasese. Instead, I just wait until the initial spike occurs and spreads decrease, then I open a position in the direction of the spike. I've had a lot of success doing this in the few months I've been trading. I've only lost 3-4 news trades doing this.

Aside from these, what other methods are there for news trading?

I'm also curious about the issues brokers have with news trading. Which methods to news trading will actually cause a broker to call/email you and threaten to close your account? I always assumed the only people brokers had issues with were traders who pay for a news feed and place orders prior to the news spike. Would brokers have issues with traders who fade the news or straddle the news?
  • Post #2
  • Quote
  • Edited 9:01pm Jan 12, 2007 8:51pm | Edited 9:01pm
I am curious, you say you have only lost a couple times, if I were you I would not change anything. If you check out the thread on the Straddling EA, you will find that it is quite difficult, even with automated metatrader coding. As for fading the news, I use this occasionaly. However, it is always because I have technical reasons to do so. If my technical system does not say to be in the other direction prior to news, I will not even attempt it. There are instances where spikes prove to be just good entrances for the daily trend in the other direction.

You are not the only one that trades the way you mention. If it works for you I would stick with it. Being that there is are about a dozen strong news releases a month and you have just a handful of losses tells me you are doing something right.

As for different ways of trading the news??? There would be straddling, fading, spike trading with a market order and positioning your self prior to news. Perhaps positioning yourself prior to the news could work like this.. I will give an example:

UK Trade Balance: You take a position short GBP/USD and long GBP/JPY with same overall $ amount. Since GBP/JPY is such an incredible carry trade, does it really matter if the news goes against you? If the news comes out good for UK close both positions for about BE. However, if the news comes out bad for UK, close GBP/USD for gain and continue to hold your new carry position in GBP/JPY. The way I look at it, if there are traders that are comfortable holding these positions for months and months without touching them... what does a little news do? Obviously this may not work if the daily/weekly trend stops going long.

I have never traded like this. It is something that has gone through my mind though.

I suppose you could always guess everytime before the news as well? :surprised

Best of luck!
The market is my nation. Traders, my family. Hello, brothers and sisters!
Quoting StockKJay
As for different ways of trading the news??? There would be straddling, fading, spike trading with a market order and positioning your self prior to news. Perhaps positioning yourself prior to the news could work like this.. I will give an example:
I've heard others mention using a hedge instead of a straddle. Basically they just have two open positions with stop losses where the limit orders would usually be. I'm not sure if all brokers allow this. I've also heard mention of a few other methods but at the moment I can't remember the names. I think one was called cross trading the news?
The most ineffective and 100% guaranteed loss method to trade the news is trading with Broker GFT.
LOL, Yea am agree with you

Quoting BurgerKing
The most ineffective and 100% guaranteed loss method to trade the news is trading with Broker GFT.
Charting Markets into the Future...MǎҖ€¥.
guys not to make to much of a point of it but out of the how many forex broker,s out there ,,you cant really count on more than a rare few that are actually workable news trading ,, although i think the carrytrade as you are calling it is a way to go , my remedy was to simply not to use the so called forex broker,s in the first place ..
peace
hemp
Placing two limit orders or opening a short and long position right before a news release seems dangerous to me. Maybe there is something I still don't understand, but I would expect fluctuation to really screw you up. I like to either place a single order before the news is released (speculation) or jump in afterwards in the direction of the market, using a tight exit strategy on both. The secret being to cut losses fast and maximize gains when they happen.

I sure would like to hear a good reason to straddle or hedge.

BTW, MIG (live) has been super during news releases.
  • Post #8
  • Quote
  • Edited 2:59am Jan 13, 2007 1:48am | Edited 2:59am
Look here

{Link deleted, see forum rule #3}
I have a broker, where I get filling every time. Only drawback is that it is not possible to set very tight stop entry stop orders right before the news and I have to set them 15 minutes before the report is released
Quoting mickeymickey
I've recently been getting more into news trading and I've decided I need to familiarize myself more with the different methods and issues to trading the news. I've seen a bunch of things mentioned here but never a formal explanation.

...straddling and fading...

Aside from these, what other methods are there for news trading?
1. work out your triggers, e.g if the nonfarm consensus is 50K, your research might indicate that you should go long if the figure comes out at 80K or more, or go short if the figure comes out at 20K or less
2. Look at the previous month's figures and prepare to make some quick adjustments if these figures are revised
3. Wait for the figures to come out and trade accordingly or if your triggers aren't hit, stay out.

I am working on a two-tier system of triggers, one is an entry as soon as the figures come out, i.e. you enter immediately after the spike. For this, the figures have to be way off the consensus. The other is to wait for the retrace and then place the trade. These triggers will be closer to the consensus.
  • Post #11
  • Quote
  • Last Post: Jan 13, 2007 8:35pm Jan 13, 2007 8:35pm
Quoting mickeymickey
I've recently been getting more into news trading and I've decided I need to familiarize myself more with the different methods and issues to trading the news. I've seen a bunch of things mentioned here but never a formal explanation.

The two different methods of trading the news I'm familiar with are straddling and fading. Straddling of course is putting two limit orders on each side of the price in order to catch the spike caused by the news release. Fading (according to Investopedia) involves entering a position at the top or bottom of a spike in hopes that the spike will reverse.

I don't use either of these methods, but I've considered using straddles. Using straddles makes me really nervous because my broker typically widens spreads to 20 points during news releasese. Instead, I just wait until the initial spike occurs and spreads decrease, then I open a position in the direction of the spike. I've had a lot of success doing this in the few months I've been trading. I've only lost 3-4 news trades doing this.

Aside from these, what other methods are there for news trading?

I'm also curious about the issues brokers have with news trading. Which methods to news trading will actually cause a broker to call/email you and threaten to close your account? I always assumed the only people brokers had issues with were traders who pay for a news feed and place orders prior to the news spike. Would brokers have issues with traders who fade the news or straddle the news?
The problem with straddling is that you place yourself at the mercy of the market and the figures. Sure, the numbers might be a surprise, in which case you should do well (assuming the market takes notice and reacts to the figures), but if the numbers are near consensus, you'll probably get a spike anyway, and the associated slippage/enlarged spread, get filled and then the market will ignore the data and go wherever it wants.

Worse still, your broker will see your orders and may try to skew the prices to your disadvantage, i.e. fill you and kill you both ways. This is why I prefer to use market orders.
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