Applying Logic to trading

I've been trying to figure a way to trade using news story. I'll view what the economic news headlines read and I try to apply logic to my trade. For example this morning I saw that Nonfarm Employment Change was due to report at 8:30 a.m. EST. I noticed that the numbers were anticipated to be lower, which would have a negative effect on the nation's currency. With this in mind, I bought EURUSD at 1.3145 expecting this news to pull the Euro higher. This in fact did not occur. The dollar was stronger in trading today. What did I do wrong? Am I looking at the information the wrong way?

Any input would be greatly appreciated.

You're falling into the typical BUY the RUMOR, SELL the NEWS trap.

With all due, respect, it was your impatience that killed the trade. The mere fact that the news suprised to the upside only added insult to injury. With the expectation of lower numbers, you should have anticipated that a surprise to the upside would have been your biggest risk, and then traded accordingly.

The problem is, by the time the news events have come out, you've already been priced in. The boosts upwards and downwards are almost always surprises. The real speculation begins a few days or even weeks before. When you SHOULD have bought was when the euro was depressed a couple of days ago, and the expectation for payrolls was to the downside. THAT's the real logic.

Let's face it, by the time you actually GET the news, the movements have mostly been priced in.

Thank you for your insight.

So if, "The boosts upwards and downwards are almost always surprises", would it be more advantageous to use technical analysis for my trades when a news story is due to report?

Yes, but your time horizon shouldn't be within minutes of the report...plus you must be aware of other mitigating factors (like other indirectly affecting news stories).

since 1978 usd -jpy move in only about 20.000 pip range, and from the bottom, it is only about 3.400 pip, if you put 1 cent a pip, you will only need about $40 to sustain if the pair goes down.

since the chance is better for you to surfive if you put one way trading, just buy !

There's a couple of things to note here.

First of all, the Yen bank rates weren't always this low. They've been this low since around 1998 or so. So your time horizon is much short.

I'm not going to disagree that buying the Yen now would probably be good, but I think we need to do some analysis here and see if the trade would be worth the risk.

At $1 a pip and 100:1 leverage, you would need $100 to buy 1 mini-lot. Now let's assume you're making $1.00 a day in interest on the USD/JPY. You could be making more now, but in the near future, as Japan raises rates and the US slashes theirs, it will come down. So, to withstand the WORST drawdown imagined, you would need $3400 for a total investment of $3500 (includes your margin). If you were to go down 1000 pips, it would take you approximately 2 and 3/4 years before the amount of interest would even break even. That means that a 1000 pips risk would yield 0% for the first almost 3 years. AFTER that year, your investment would net $365 a year or a little better than 10%. Now, that's assuming a drawdown of 1000 pips only. Any more than that and it would take longer to get out. If we were to have a drop of 3400 pips aside from getting liquidated, it would take 9 and 1/2 years just to break even with the interest...and that's assuming an average of $1 per day.

Now, with all of that said, the chances of dropping 3400 pips is low, but I do think a correction of 1000 pips isn't out of the cards. However, that's assuming no upward movement at all.

The issue is this, at $1 per day in interest gain, even a drop of 365 pips over the course of a year would set you back an entire year. Thus your reasonable ROI should the Yen decide to strengthen against the dollar (which is highly likely) will set you back at least a year. You won't necessarily lose any money but you may not gain enough interest to warrant a buy-only strategy...your adjusted annual ROI is around what you'd make in the traditional stock market.