Pre-news sentiment - an alternative to news straddle?

There was no 20 MA consensus prior to NFP and unemployment rate which meant that we had to wait for the release and use Henry Liu's retracement method. No consensus means we stay out until after the spike has retraced.



The upper chart shows pre-news non-consensus and the second chart shows the spikes with their retracements.



In this example pre-news sentiment was not a viable trading option.

Another very good example of strong pre-news sentiment being a good indicator of a news spike direction. This is UK CPI, and the first chart shows the pre-news sentiment.



This second chart shows the news spike.

Hey tellboy, just curious is this strategy still working?

cheers

Keeping it simple with only four pairs. See the consensus pre-news sentiment on all four EUR pairs in advance of the German economic sentiment.

Made a nice profit today on GBP pre-news sentiment on four pairs. The strategy was to set a 15 stop and 50 pip target with a trailing stop of 15/16. I took 50% profit of each pair when I was sure that the stop loss had moved to above the opening price. GBP/JPY went all the way to its 50 pip target. The news release was negative - in reverse of pre-news expectations. Therefore trailing stops caught the down spike and saved profits. Two different brokers show the results for the day (in the explorers above). Here is a chart showing the price action from 06:00 up to the news release.

Slipped up on this one. Should have gone with pre-news sentiment (ignoring the weak GBP). Taking half profit at 13:00 would have yielded good profits.

The first pair to break the 20 MA to the downside was GBP/USD at 07:15. All other pairs followed at 07:35 - 07:40. Domino cascade resulted in 30 pip move on CHF and about 10 on all others. Potential pre-news sentiment profit was therefore about 50 - 60 pips. Lesson = if one pair breaks its channel with a strong bar and a change in colour for the 20 MA, then go with it or wait for the second break-out.

GBP CPI showed a good consensus pre-new sentiment which followed through with a good spike. Take special note of the false breakout at about 7 am on all pairs, followed by an opposite breakout to the downside. This retraced to about 33 - 50% Fib and then continued to major support lines before resting prior to the news release. This is a classic pattern that can be traded with 50% profit take just before the news release and a stop loss to protect the remaining position.

EUR releases on French and German created a bit of confusion. USD and JPY showed agreement on GBP strength from 07:00. Get out prior to release that went against the pre-news sentiment.

GBP CPI Pre-news sentiment on 16/9/14.

Henry's CSM showed a strong USD against weak GBP. EUR and CHF led the way with JPY following in the consensus. Follow the trend and enter on minor retracements. The strong move commenced at 7:45 with trades closed at 08:00 to be safe. However, the move continued with an ever-weakening GBP.

Should have let it run to JPY's 50 pip target.

Consensus on a strengthening GBP pre-news sentiment for the employment figures release. Took profits at 8:30 to avoid any possible retracement. However, price did continue to rise in unison. Should learn more patience. Strategy of following a trending consensus with entry at a retracement seems to be working.

Here is a good reason to exit trades prior to the release. Despite favourable news for GBP the spike went the wrong way. This exercise demonstrates the value of pre-news sentiment and the avoidance of risk by taking profits before the release.

I have now simplified this strategy by trading only four pairs with GBP, i.e. EUR/GBP, GBP/USD, GBP/CHF and GBP/JPY.

A further simplification is to only trade the pre-news sentiment of those news releasees that have the highest potential reaction, i.e. in the second week of the month. These news releases are; CPI, employment figures and retail trade.

The rules are simple: From 7 am follow the trend if there is agreement on all four pairs. Enter at a minor re-tracement with a 15/50 stop and target. Set a trailing stop at 16 pips. Exit all trades before 9 am, especially if one of the pairs reaches its 50 pip target (usually GBP/JPY).

If there is no agreed trend on all four pairs - stay out.

Simple.

Fade that spike for loads of pips.

Fade that spike for 15 pips on all pairs.