Anyone believe price movement at news releases is fundamental? | Forex Factory

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Anyone believe price movement at news releases is fundamental?

  • #1
  • First Post: Jul 2, 2015 7:42am Jul 2, 2015 7:42am
I'm talking about the impossible reaction of price, seen at the moment the clock hits the minute the news is "released". Why is price going up and down with absurd speed and distance?

Is that the reaction of all those traders who put their orders in @ the second the news release is announced? Maybe, but only if they set their trades up to open based on time and they take the spread and slippage for granted. So a bit of a gamble really.

Is it the genuine fundamental reaction to the "good/bad" news? Well it can't be can it? Because one would have to wait for the actual news.

Is it the broker? Neh, movement sort of is the same across brokers.

Are the banks shaking of investors to free liquidity? That must be it.

What do you think?
  • #2
  • Jul 2, 2015 8:35am Jul 2, 2015 8:35am
Quoting Anusragger
Are the banks shaking of investors to free liquidity?
I personally agree the fluctuations could be started and certainly come useful for some market players (dealers getting out of losing positions for example), but it probably isn't the whole story. I think the big players are very much in tune with the market and the fundamentals. In other words, while there certainly is a predator-prey relationship going on, I do not think the predators define the whole landscape - they are just more familiar with it, and can even connect and act coherently when need arises, which small (uninformed) speculators cannot. The landscape is given by economic realities.

Cheers,
k
  • #3
  • Jul 2, 2015 1:57pm Jul 2, 2015 1:57pm
Do you look through some financial news before trading? Even when you don't understand them, there are expectations and discussions. For example, some legal estate data will be lower than expected, it will have influence on some currency, you go sell, and sell stop for sure
And what do you mean "actual news"? if after news chart started to jump - these news are actual!
  • #4
  • Edited 4:17pm Jul 2, 2015 3:53pm | Edited 4:17pm
Yeah its the central banks computers which are operated by hamsters on wheels. this is the reason why you see such unbelievable vol after econ news release
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  • #5
  • Jul 2, 2015 5:24pm Jul 2, 2015 5:24pm
Emotion. People get emotional when their money is at risk.
All posts are my personal opinion
  • #6
  • Jul 2, 2015 5:29pm Jul 2, 2015 5:29pm
The market disappears around highly anticipated news, no dealers will take the risk to give tight quotes, so small market order moves the markets much more than in usual trading conditions, pretty much all there is to it
It's not about what you make, it is about what you don't lose
  • #7
  • Jul 3, 2015 12:48am Jul 3, 2015 12:48am
Quoting aceventura69
The market disappears around highly anticipated news, no dealers will take the risk to give tight quotes, so small market order moves the markets much more than in usual trading conditions, pretty much all there is to it
Didn't think about that one. Smart.
  • #8
  • Jul 3, 2015 8:20am Jul 3, 2015 8:20am
Quoting aceventura69
The market disappears around highly anticipated news, no dealers will take the risk to give tight quotes, so small market order moves the markets much more than in usual trading conditions, pretty much all there is to it
Not so. If that was true, then the volume would also be low. Take a look at the traded volume totals for a futures pair during a news event.
  • #9
  • Jul 3, 2015 9:18am Jul 3, 2015 9:18am
Fundamental = funny Mental
  • #10
  • Jul 3, 2015 11:50am Jul 3, 2015 11:50am
price is wild during news releases simply because there is a lack of liquidity. in normal circumstances, there are decent amount of people willingly to buy and sell at most prices near the last traded prices, lets call this range the last traded zone. during news releases, people are less willingly to buy and sell near the last traded zone as they are uncertain about how other people will react to the news.

thus, those that need to react immediately i.e. highly leveraged, wrong about their prediction accounts will come into the market grabbing whatever bids/offer available. which then causes the wild movement.

take a look at the table below, if a trader needs to buy 100,000 market order during the news release because he was wrong, the current offer vol would not be able to fulfill his demand. his buying will buy price up pass $28 and until there another trader provides the vol and sell to him.

so conclusion is, is not really fundamental, is emotional and irrational. fundamental takes time to build into the prices, usually over months and years.
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  • #11
  • Jul 3, 2015 2:22pm Jul 3, 2015 2:22pm
Quoting hieronymus
{quote} Not so. If that was true, then the volume would also be low. Take a look at the traded volume totals for a futures pair during a news event.
the raise in volume is a reflection of people acting on the spot, taking price, that is more indicative of market orders, people are covering or are afraid of missing out or whatever but this is just on side of the equation. The fact remains that the market is thinner around news time. This is shown by the spread widening. more price takers less liquidity providers at least for the first few seconds or minutes for big surprises event. This is a pretty textbook combination for wacky price movement.

A great example of that is the swiss debacle.. everybody was trying to get in or out so volume was high but spreads were also insane, no dealers was willing to assume the risk to be on the wrong side of the news without charging a huge premium.

Tradingwapro comparison of the depth of market is pretty self explanatory...
It's not about what you make, it is about what you don't lose
  • #12
  • Jul 3, 2015 2:41pm Jul 3, 2015 2:41pm
Quoting aceventura69
{quote} the raise in volume is a reflection of people acting on the spot, taking price, that is more indicative of market orders, people are covering or are afraid of missing out or whatever but this is just on side of the equation. The fact remains that the market is thinner around news time. This is shown by the spread widening. more price takers less liquidity providers at least for the first few seconds or minutes for big surprises event. This is a pretty textbook combination for wacky price movement. A great example of that is the swiss debacle.....
Who cares about "dealers" or bucket shops or all the retail traders in the market combined. News is a place for the big boys to put on there positions without moving the market against them. Of course the retail market is thin and spreads are wide, but the retail speculative world isn't reality. Big boys, market makers, banks, SM, etc etc.
Look at any market that isn't very liquid and yes you will see all the things your talking about, the micro futures currencies are a minor example. I don't think that's the same type of movement as news events.
  • #13
  • Jul 3, 2015 3:16pm Jul 3, 2015 3:16pm
I think the banks and market makers get the reports ahead of time and look them over but are not allowed to trade until the release time. This means there is a ton of orders just waiting for the "send" button to be hit. Then those orders run into all kinds of sell limits, buy limits of various sizes.

I think of the news releases like a 30 day exponential moving average. Today's news is more important than last week's but all get factored in. This is why a spike up is usually followed by a pullback and then a couple hours later it goes back to the previous trend whatever that was.
Enter Signature
  • #14
  • Jul 3, 2015 3:34pm Jul 3, 2015 3:34pm
i'm not talking about retail here..

If I'm a trader at Barclays and ABC hedge fund comes to me and say I want to put a market order of 100 billions to buy USD because he knows something I don't and the NFP report is coming out in 1 minute I will give a pretty damn wide quote... does not matter if matter if it is retail or interbank no dealer is willing to take that kind of risk for a spread of ,5 pip...

If the big boys on the buy side wants to use news to absorb their orders good for them but it is not what causes erratic movement, they are just using it to their advantage, they are waiting for the herd of headless chicken to drive price to where they are willing to act.What allows that to happen is the fact that dealers/liquidity providers are no longer willing to make a tight market.

The dealers who's job is to provide liquidity for the hedge fund guy or the big corporation does not care that much about fundamental, he cares about getting rid of undesirable position his clients give him while retaining is comm/spread as much as possible.
It's not about what you make, it is about what you don't lose
  • #15
  • Jul 4, 2015 5:37pm Jul 4, 2015 5:37pm
Quoting tradingwapro
price is wild during news releases simply because there is a lack of liquidity. in normal circumstances, there are decent amount of people willingly to buy and sell at most prices near the last traded prices, lets call this range the last traded zone. during news releases, people are less willingly to buy and sell near the last traded zone as they are uncertain about how other people will react to the news. thus, those that need to react immediately i.e. highly leveraged, wrong about their prediction accounts will come into the market grabbing whatever bids/offer available. which then causes the wild movement. take a look at the table below, if a trader needs to buy 100,000 market order during the news release because he was wrong, the current offer vol would not be able to fulfill his demand. his buying will buy price up pass $28 and until there another trader provides the vol and sell to him. so conclusion is, is not really fundamental, is emotional and irrational. fundamental takes time to build into the prices, usually over months and years. {image}

Quoting aceventura69
{quote} the raise in volume is a reflection of people acting on the spot, taking price, that is more indicative of market orders, people are covering or are afraid of missing out or whatever but this is just on side of the equation. The fact remains that the market is thinner around news time. This is shown by the spread widening. more price takers less liquidity providers at least for the first few seconds or minutes for big surprises event. This is a pretty textbook combination for wacky price movement. A great example of that is the swiss debacle.....

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I'm not trying to convince anyone. I'm not in the "convincing" business.
  • #16
  • Jul 4, 2015 5:55pm Jul 4, 2015 5:55pm
IMO banks already know where price will shoot to after the release they just use these releases as an excuse to run their profits. If you read the Sonic R System and learn to see price the way it tells you, you will start to see how banks rally prices up just before a news release to get better short positions and vice versa, you can almost know for sure when it will shoot to without having to look at figures.
  • #17
  • Last Post: Jul 9, 2015 3:10am Jul 9, 2015 3:10am
Quoting Don M
I think the banks and market makers get the reports ahead of time and look them over but are not allowed to trade until the release time. This means there is a ton of orders just waiting for the "send" button to be hit. Then those orders run into all kinds of sell limits, buy limits of various sizes. I think of the news releases like a 30 day exponential moving average. Today's news is more important than last week's but all get factored in. This is why a spike up is usually followed by a pullback and then a couple hours later it goes back to the...
Not sure if this is correct. News releases are v. tightly controlled. However, banks have their own army of economists/analysts that might disagree with the commonly predicted outcome, and will use their info to their advantage. I think that this is what happened for GBP 15.07.07 09.30 Manufacturing production. Look at GBPUSD price action prior to release. Manufacturing production figures are lower than expected... Banks got there first.
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