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Strategy for news trading

  • #1
  • First Post: Feb 18, 2007 1:19pm Feb 18, 2007 1:19pm
Since you never know if a report will cause the market to fall or jump, I think the way to go is to place 2 limit orders - 5-6 pips on either side of the current price, with a 20\5 (Give or take) P&L ratio. That way, You're almost guaranteed to take the correct side of the spike once the report comes out.

I'm trying it on demo mode right now, with pretty good results thus far.

Did anyone else try it? How do you place your orders?
  • #2
  • Feb 18, 2007 4:19pm Feb 18, 2007 4:19pm
It's called straddling - and you'll find plenty of information on that particular strategy if you search through FF Plenty of people trade news this way - but beware - news that whipsaws can bury you faster than you can blink.
  • #3
  • Feb 18, 2007 4:22pm Feb 18, 2007 4:22pm
Exactly - what happens when a report deviates significantly from what it was expected to be and the currency pair drops 30 pips instantly, if not more?
  • #4
  • Feb 18, 2007 4:25pm Feb 18, 2007 4:25pm
Quoting ~Shard~
Exactly - what happens when a report deviates significantly from what it was expected to be and the currency pair drops 30 pips instantly, if not more?
That's the whole point of the strategy.

You use stop orders not limit orders (unless you're trying to fade).

This has been discussed 1000s of times on the forum.
  • #5
  • Feb 18, 2007 4:25pm Feb 18, 2007 4:25pm
worst case scenario, you catch both stop loss orders. Maybe a 100 $ loss overall.

How often does the whipsaw occur?

And what other strategies are common?
  • #6
  • Feb 18, 2007 4:26pm Feb 18, 2007 4:26pm
No offence but just browsing through the forum will answer your questions.

BTW worst case scenario is you get slipped 200 pips and blow your account.
  • #7
  • Feb 18, 2007 4:30pm Feb 18, 2007 4:30pm
Quoting notouch
That's the whole point of the strategy.

You use stop orders not limit orders (unless you're trying to fade).

This has been discussed 1000s of times on the forum.
Ah, I understand now, thanks for the clarification. I'm still pretty new to all of this.
  • #8
  • Feb 18, 2007 4:32pm Feb 18, 2007 4:32pm
you said to browse through the forum- but this is only one page. I am new and am curious about this strategy as well. thanks for everyones help!
  • #9
  • Feb 18, 2007 4:35pm Feb 18, 2007 4:35pm
What I have noticed is the spread gets widened.
Even if you are on the correct side and you have placed
just a 10 pip TP it may not be hit.
Some times if you have placed 30 pip TP it will get hit but
Because of the wide spread you will notice that you have
gained only 17 or 18 pips.
Senbanda
  • #10
  • Feb 18, 2007 5:10pm Feb 18, 2007 5:10pm
Quoting Golden Boy
worst case scenario, you catch both stop loss orders. Maybe a 100 $ loss overall.

How often does the whipsaw occur?

And what other strategies are common?
It is a common strategy - but you have to research the news you are trading - look back over historic charts ( there is a sticky by Burger King at the top of the News trading Room). Also by trading demo for a while, you will get to know the releases that are prone to it. Certain releases like NFP are prone to whipsaws. It can shoot up 50 pips , revisions on the data come out, and it can shoot 100 pips in the other direction within seconds, and price will be moving so fast the broker won't let you out. Both of your stop losses have been hit, and worse case scenario, if you have no guaranteed stop loss your account is blown away. Research is the key - and learning where to place your stop losses for different releases. It can be a dangerous game, and a profitable one if you know what you are doing. Good luck.
  • #11
  • Feb 18, 2007 5:14pm Feb 18, 2007 5:14pm
Quoting forexprincess
It is a common strategy - but you have to research the news you are trading - look back over historic charts ( there is a sticky by Burger King at the top of the News trading Room). Also by trading demo for a while, you will get to know the releases that are prone to it. Certain releases like NFP are prone to whipsaws. It can shoot up 50 pips , revisions on the data come out, and it can shoot 100 pips in the other direction within seconds, and price will be moving so fast the broker won't let you out. Both of your stop losses have been hit. Research is the key - and learning where to place your stop losses for different releases. It can be a dangerous game, and a profitable one if you know what you are doing. Good luck.
Read and watch Felix's mails and video. He gives good advice for news trading.
  • #12
  • Feb 18, 2007 5:38pm Feb 18, 2007 5:38pm
While it may seem logical on paper to a Straddle on News release be very careful using it on a news releases...especially if U are new.....while I don't mean to be overly negative....it can really hurt your account if u are not careful...actually it can hurt your account even if you are careful but if u don't know what u are doing....and I've got the account statements to prove it!!!!!

Straddling can be done for some news releases some times depending on the particular market condition existing at that particular time......for instance report A coming out in month 1 depending on the market conditions may give u an opportunity to use the strategy while month 2 the same report may not due to many various reasons......so it really is a very unique thing which personally I think should only be used very carefully and sparingly...

If U are new by all means demo trade as many news events as possible you will get a feel for the market and how it moves....do it for various reports coming out at various times.......and have realistic expectations of when to go live...coz the learning curve for volatility trading is a long one....hang in there and buckle up!!!
  • #13
  • Feb 18, 2007 5:47pm Feb 18, 2007 5:47pm
This is just a heads up for the newbies, this strategy works in demo accounts a whole lot better than live accounts.
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #14
  • Feb 18, 2007 6:57pm Feb 18, 2007 6:57pm
Quoting StockKJay
This is just a heads up for the newbies, this strategy works in demo accounts a whole lot better than live accounts.
Haha, I think that's probably the case for a lot of trading methods...
  • #15
  • Feb 18, 2007 7:00pm Feb 18, 2007 7:00pm
lol. Okay, that may be true. You understand what I am saying though
The market is my nation. Traders, my family. Hello, brothers and sisters!
  • #16
  • Feb 18, 2007 8:07pm Feb 18, 2007 8:07pm
Quoting StockKJay
lol. Okay, that may be true. You understand what I am saying though
Yeah yeah, just having some fun.
  • #17
  • Feb 19, 2007 3:03am Feb 19, 2007 3:03am
The way I do it is wait for the news to come out and while on a 5 minute chart, you can see the reaction to it. usually about 15 minutes past the news event. almost always price settles into a channel. That for me is the ideal time to set up a Channel breakout trade or some people call it a box trade. I usually do very well with that, because of the moment generated after the market makes up it's collective mind on direction. I set my price projections based on technicals and FIB numbers.

The above is text from a SMJones post, I pinched it and posted it here.

I have been using this method to get a point of entry for post news spike, it works a charm....safe...less stress....no increase spread.
  • #18
  • Feb 19, 2007 10:12pm Feb 19, 2007 10:12pm
Quoting Jarret
The way I do it is wait for the news to come out and while on a 5 minute chart, you can see the reaction to it. usually about 15 minutes past the news event. almost always price settles into a channel. That for me is the ideal time to set up a Channel breakout trade or some people call it a box trade. I usually do very well with that, because of the moment generated after the market makes up it's collective mind on direction. I set my price projections based on technicals and FIB numbers.

The above is text from a SMJones post, I pinched it and posted it here.

I have been using this method to get a point of entry for post news spike, it works a charm....safe...less stress....no increase spread.
yess i agree with you too..
stay away for news about 15m and then new channels built...
  • #19
  • Feb 20, 2007 12:18am Feb 20, 2007 12:18am
Quoting Jarret
The way I do it is wait for the news to come out and while on a 5 minute chart, you can see the reaction to it. usually about 15 minutes past the news event. almost always price settles into a channel. That for me is the ideal time to set up a Channel breakout trade or some people call it a box trade. I usually do very well with that, because of the moment generated after the market makes up it's collective mind on direction. I set my price projections based on technicals and FIB numbers.

The above is text from a SMJones post, I pinched it and posted it here.

I have been using this method to get a point of entry for post news spike, it works a charm....safe...less stress....no increase spread.

Hi Jarret:

Where's SMJones's post? Intereted. Would you please post it here? Thanks.

PM
  • #20
  • Feb 20, 2007 2:52am Feb 20, 2007 2:52am
http://www.forexfactory.com/showthread.php?t=4734
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