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Trading the News Spike

  • #1
  • First Post: Sep 7, 2010 8:10pm Sep 7, 2010 8:10pm
I traded NFP last week and watched as price spike and bounced around like a ping pong ball in a tornando.

Just before the news is release, traders place straddle orders (stop orders). Once the price level is hit, these orders turn into market orders. I understand that there are no stop limit orders permitted? Is that correct?

If so (market orders), this would cause a huge dump of market orders in the market, causing price to spike and bounce around unitl they are filled, and stops taken out.

Would this be a correct assessment?
Tipster Trendlines - Trade from the chart
  • #2
  • Edited 10:50pm Sep 7, 2010 8:53pm | Edited 10:50pm
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting Tipster
I traded NFP last week and watched as price spike and bounced around like a ping pong ball in a tornando.

Just before the news is release, traders place straddle orders (stop orders).
As long as by stop orders you mean market orders sitting at a predetermined price. And not traders preparing to exit the market.
(i get the impression you understand that, just clarifying for anyone else)


Quoting tipster
Once the price level is hit, these orders turn into market orders.
right
Quoting tipster
I understand that there are no stop limit orders permitted? Is that correct?
"stop limit order" is kind of an oxymoron to me. "stop" implies a market order, a limit order is the opposite.


Quoting tipster
If so (market orders), this would cause a huge dump of market orders in the market, causing price to spike and bounce around unit they are filled, and stops taken out.
If you're just talking about market orders then i don't think price should bounce around. The market order is triggered and the order is processed at the best price available. If price hits more stops then the market should continue in that direction. Unlike a limit order which can be partially filled, or not fill at all, once a market order is triggered it continues until it is filled.

I think that price bounced around in your example because the market orders reached a pool of liquidity or otherwise exhausted.

Hope this is helpful.
  • #3
  • Sep 8, 2010 6:52pm Sep 8, 2010 6:52pm
Thanks for the reply.
Yes, I meant stop orders in that sense, they turn into market orders.

Let me clarify one of the questions - Is there such an order as this

Price is at 1.5000
BuyStop order placed at 1.5100
Price reaches 1.5101, order chaged to a BuyLimit order at 1.5100 (or other defined price)

I think I recall using this on Interactive Brokers, can't remember exactly, I trade stocks and futures with them but haven't for a while

If this type of order does not exist on MT4, I know I can code it and have to consider the brokers rules for placing orders. In my case, my broker allows limit order to be placed inside the spread, at least thats what their email stated.
Tipster Trendlines - Trade from the chart
  • #4
  • Sep 8, 2010 8:16pm Sep 8, 2010 8:16pm
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Shoot. I just typed up an example about placing limit orders on the wrong side of the market and then i re-read your last post. Now i see why you called it a stop-limit.
So to answer your question: I'm not aware of any brokers that have such an order. I haven't used many brokers though, so hopefully somebody else could be more helpful.
  • #5
  • Sep 8, 2010 10:49pm Sep 8, 2010 10:49pm
Here is what I'm getting at.
During news, price jumps all over the place, not just straight up, it bounces around very quickly for 30 to 60 seconds (never the same thing twice I bet)

I'm thinking lots of market order firing off. So instead of placing a straddle with stop orders that when triggered turn into market orders where you get a bad fill.

During the last NFP, once price spiked, I dragged my "buy' script onto the chart and was filled at market. Then about 10 seconds later dragged my "sell' script onto the chart and got filled. On a 0.1 lot, made 30 bucks in 10 seconds. I tried it to see what would actually happen and it was a small lot. Interesting enough to make me think.

why not do this....

Place a line on the chart, lets say above price, we'll play the long side.
When this line is breached (price rises over the line), the EA places a limit order, thus you get filled at YOUR price and not at a crappy market order price.

This may not get filled. But it's a way to play news and control your risk.

While watching price action on news it looked like this would work but I haven't tried it. I plan to try it on a live account with a small lot.

...call me crazy.
Tipster Trendlines - Trade from the chart
  • #6
  • Sep 8, 2010 11:13pm Sep 8, 2010 11:13pm
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Well, if you can consistently work out where price will reverse and fill your order then i suppose you've discovered an inefficiency in the market.

Quote
I plan to try it on a live account with a small lot.
if your implying that your initial tests were done on a demo account then expect that your order will not fill.
  • #7
  • Sep 8, 2010 11:19pm Sep 8, 2010 11:19pm
Quoting Czech
Well, if you can consistently work out where price will reverse and fill your order then i suppose you've discovered an inefficiency in the market.

if your implying that your initial tests were done on a demo account then expect that your order will not fill.
Initial test with NFP was live. I'll let you know what happens, just need to be next to the PC when there an event. I don't trade for a living so it might take a while. Thanks for the comments.
Tipster Trendlines - Trade from the chart
  • #8
  • Sep 9, 2010 12:51am Sep 9, 2010 12:51am
Quoting Tipster
Initial test with NFP was live. I'll let you know what happens, just need to be next to the PC when there an event. I don't trade for a living so it might take a while. Thanks for the comments.
ah your gambling your orders are going to be filled in either direction and that its going to move your way and stay that way long enough to get out. tisk tisk bet on black brother.
  • #9
  • Sep 9, 2010 4:03am Sep 9, 2010 4:03am
Quoting Czech
Shoot. I just typed up an example about placing limit orders on the wrong side of the market and then i re-read your last post. Now i see why you called it a stop-limit.
So to answer your question: I'm not aware of any brokers that have such an order. I haven't used many brokers though, so hopefully somebody else could be more helpful.
Interactive Brokers, and I expect many others do as well. A stop-limit order is a stop order that becomes a limit order once activated. You can use it to place a limit order above the market.
  • #10
  • Sep 9, 2010 4:36am Sep 9, 2010 4:36am
  •  SwissRaj
  • | Joined Aug 2010 | Status: (¯`·._.· the lonely trader ·._.·´¯) | 109 Posts
Quoting Tipster
...call me crazy.
crazy

Take it easy with that game of hunting the news. It's a dangerous one.
>>> psychology is more important than technicalities ^_^
  • #11
  • Sep 9, 2010 5:16am Sep 9, 2010 5:16am
Many have tried, many still do and most will fail.

It's the obvious one to chance isn't it, the good old volume and speed of NFP! But yet if it were so simple, why doesn't everyone do it?

Stops aren't guaranteed, orders may slip and re-quote, some might get filled, some might not, the amount of lag and whip in these news releases is ridiculous and should in reality be avoided by the bucket shop traders.

If you have a genuine STP i.e. a large working capital with a direct to market connection, it's tradable, otherwise I'd avoid the inherent risk of attempting any kind of accuracy with a bucket shop during these releases.
"I made all my money by selling too soon"
  • #12
  • Sep 14, 2010 10:55am Sep 14, 2010 10:55am
Quoting tommbstone
ah your gambling your orders are going to be filled in either direction and that its going to move your way and stay that way long enough to get out. tisk tisk bet on black brother.
Only one direction.
Tipster Trendlines - Trade from the chart
  • #13
  • Sep 14, 2010 11:02am Sep 14, 2010 11:02am
Quoting Bleek
Many have tried, many still do and most will fail.

It's the obvious one to chance isn't it, the good old volume and speed of NFP! But yet if it were so simple, why doesn't everyone do it?

Stops aren't guaranteed, orders may slip and re-quote, some might get filled, some might not, the amount of lag and whip in these news releases is ridiculous and should in reality be avoided by the bucket shop traders.

If you have a genuine STP i.e. a large working capital with a direct to market connection, it's tradable, otherwise I'd avoid the inherent...
small size, same as you would in Vegas, gamble with only what you can afford to lose. so far so good. Actually, this is more of an experiment with one small account I have. IB is a good choice for the real deal and my larher pool of funds, I'm betting very small on news. I don't trust MT4 for trading like this, it really isn't a great platform... to may links in the chain that introduces all kinds of problems as you have suggested above. Let the experiment begin....
Tipster Trendlines - Trade from the chart
  • #14
  • Last Post: Sep 14, 2010 12:19pm Sep 14, 2010 12:19pm
I did the news trades just as you said Tipster. I had a buy stop on one side and a sell stop on the other, both with a stop loss. Last week, this was gold on three different news releases. Today, lost on all 3. Everything I made last week, was lost this week. That included slippage on a stop loss, due to a gap, of more than TWICE the original stop loss!! Very frustrating. The other issue I have with my broker is a variable spread. Right before news, the spread gets huge and hits your buy stop.

NO MORE!! Not worth it. I will take the high probablity trades from now on. The fast money is very appealling, no doubt, but let's be serious. When the market moves in your direction under normal trading, the profit comes fast enough.
Lord, Liar, Lunatic. Those are only 3 options to Christ's diety claim.
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