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  • #14,701
  • Nov 13, 2015 7:22pm Nov 13, 2015 7:22pm
Quoting Kilian19
{quote} All news related strategies for options I have come across so far suggested to buy a straddle at the money. I will play around with payout profiles a little bit but I am sure that due to me not understanding the basics well enough options will not be used in my daily trading anytime soon. There...
You're right, there are MANY different strategies & opinions about how to trade options. As I mentioned, I've never used them for news trading. The reason I suggested using far OTM options is the low potential loss compared to buying a straddle @ the money but you'd have a low win rate. If you buy ATM options, there's NO intrinsic value so if the news event has very little reaction, you're going to lose a decent amount in both positions because of the inflated premium prior to the news. OTM options will lose also but small losses.

I trade for long-term positions and mostly write options but you need to understand the risk/reward. If you sell naked puts/calls then you have unlimited loss potential the same as buying/shorting the underlying. Selling spreads is safer but rewards are smaller so you need a high success rate to be profitable. Selling far OTM options will give a high win rate but the occasional loss will wipe out many wins. I prefer to sell puts in something I'm willing to buy @ a certain price. It's just a method of buying the underlying @ a lower price than directly buying the underlying.
  • #14,702
  • Nov 14, 2015 2:37am Nov 14, 2015 2:37am
Quoting Tony112
{quote} Carllos, happy to hear you're on the right path. Other quarterly, or yearly events are good to trade such as: interest rates, FOMC, speeches etc. Keep it to only the big ones. Leverage is 1:50 max, to avoid series of bad luck. Risk in capital per trade : max loss trade 6% average loss trade 3%
"Hoe ur pips mate?" fxcarllos
  • #14,703
  • Nov 14, 2015 11:36am Nov 14, 2015 11:36am
Hi, Tony! If you don't experience big slippage and your target is 120 pips, isn't it better to use your strategy both ways, buy and sell. Maybe on different pairs, if you're not allowed hedging. Theoreticaly you'll take 100 pips no matter where the price goes, every time. Off course, there is a small chance to hit both your stops, but that's very rare...
Have you ever considered this strategy?
  • #14,704
  • Nov 14, 2015 11:47am Nov 14, 2015 11:47am
Quoting Alex81
Hi, Tony! If you don't experience big slippage and your target is 120 pips, isn't it better to use your strategy both ways, buy and sell. Maybe on different pairs, if you're not allowed hedging. Theoreticaly you'll take 100 pips no matter where the price goes, every time. Off course, there is a small chance to hit both your stops, but that's very rare... Have you ever considered this strategy?
This has been discussed a few times already, and the chance of a fixed 100 pip tp in both direction without hitting both stops doesn't happen on rare events. Just study a few news and you see many many whipsaws. The action after the news event is priced in is completely random for most of the news.
  • #14,705
  • Nov 14, 2015 3:47pm Nov 14, 2015 3:47pm
Sorry if i have'nt read all 736 pages of this thread. I've studied all the news like crazy. I'm trading news almost exclusively(more then 100) for two years now, on real account with straddle. There are too few news for Tony's strategy that could go 120 pips, when they go. So, you're saying, and it's true, that there are many many whipsaws and can't get 100 pips without hitting your sl. But if you can't get 100 you surely can't get 120. So, what you're saying is that Tony's strategy doesn't work, right? (don't answer, it doesn't matter!)
  • #14,706
  • Nov 14, 2015 4:45pm Nov 14, 2015 4:45pm
You haven't read my post thoroughly but as you said no elaboration is needed.
  • #14,707
  • Nov 15, 2015 10:18am Nov 15, 2015 10:18am
Quoting Alex81
Sorry if i have'nt read all 736 pages of this thread. I've studied all the news like crazy. I'm trading news almost exclusively(more then 100) for two years now, on real account with straddle. There are too few news for Tony's strategy that could go 120 pips, when they go. So, you're saying, and it's true, that there are many many whipsaws and can't get 100 pips without hitting your sl. But if you can't get 100 you surely can't get 120. So, what you're saying is that Tony's strategy doesn't work, right? (don't answer, it doesn't matter!)
Seems there might be a disconnect on the straddle questions as they're brought up. I'm just a casual passerby on the thread but I've entertained the same thought.
Seems the strategy is to take a pre-news position with a 18 to 120 stoploss/take profit ratio with a random entry direction.
So even if it works you have a 50/50 chance you took the "right" direction.
So why not take a pre-news straddle position (not pending orders) so the direction is immaterial. If the 1 sided entry would work, then the 2 sided should as well. The correct side will just take out your incorrect side for an 18 pip loss. So you're trading an 18 pip loss for the elimination of the 50/50 direction choice.
Killian...You mention it wouldn't work due to whipsawing. But if that's the case wouldn't the one sided fail as well.
Must be something I'm missing.
  • #14,708
  • Nov 15, 2015 12:38pm Nov 15, 2015 12:38pm
Quoting spyderman
Killian...You mention it wouldn't work due to whipsawing. But if that's the case wouldn't the one sided fail as well. Must be something I'm missing.
That is exactly the point. If you win by chance on a one sided but would loose if you enter the 2 sides of the trade the same time the strategy holds no value as it was just pure luck! Taking both sides evens out the equity and balance curve (+ smooth equity curve, - margin requirement).
I am trading the 2 sided straddle as well depending on the news. I emphasize that the fixed tp is no good.
  • #14,709
  • Nov 15, 2015 12:50pm Nov 15, 2015 12:50pm
Tony's strategy is ok as long a you are not strangely unlucky and if you have a serious broker with good liquidity. In my case f.e. the eur, gbp, yen and cad pairs have huuuuuge slippage during news events, so the 20 pips sl is out of the question. The others aud, nzd have very small or 0 slippage, but you can't reach 120 pips even on NFP. So, if I trade those two the r/r ratio might be 1/3, if it has big impact. So in my humble opinion, those who can use this strategy, you should do at least a good tehnical analisys to see if the the price can go that far in that direction. it might be for example a very strong daily or weekly s/r line at 30~40 pips. So if you go with a side at least make sure it can go far enough.
With straddle, might work, it's more difficult, but again only with small or no slippage and be carrefull not to let the orders get triggered too soon, use an OCO at least and a BE or trailing ea if you're in profit.
  • #14,710
  • Nov 15, 2015 3:36pm Nov 15, 2015 3:36pm
no offense guys but i dont really understand what you are discussing? from my point of view there is no reason to change anything regarding his strategy. assuming he is telling the truth then he managed to live off trading after 7 years with an initial capital of just 1000$.. why improve such a method? this is outstanding! i dont think he is living with just 500 or 1000$ the month so we can think of a decent amount of money he already gained. so why would you complicate it? let us just toss the coin and celebrate our winners

ofc you can discuss whatever you want i just like the easy approach!
"Everybody gets what they want out of the market."
  • #14,711
  • Nov 15, 2015 6:34pm Nov 15, 2015 6:34pm
Quoting spyderman
{quote} Seems there might be a disconnect on the straddle questions as they're brought up. I'm just a casual passerby on the thread but I've entertained the same thought. Seems the strategy is to take a pre-news position with a 18 to 120 stoploss/take profit ratio with a random entry direction. So even if it works you have a 50/50 chance you took the "right" direction. So why not take a pre-news straddle position (not pending orders) so the direction is immaterial. If the 1 sided entry would work, then the 2 sided should as well. The correct side...
Since about year 2009, most brokers do not allow hedging anymore, i.e. taking a long & short trade on the same currency pair, with the same account. The trade will end up getting netted off, usually you end up with no trades with a loss.

I have been following this thread since the beginning, initially the idea was to put 2 pending order, one long & one short, but when the spread gets be triggered, and quickly get stopped out. So the hard part is finding the right balance of enough volatility, not risking too much capital, and yet able to participate in the trade without getting "kicked" out unceremoniously.
  • #14,712
  • Nov 15, 2015 6:43pm Nov 15, 2015 6:43pm
Quoting pipetto
no offense guys but i dont really understand what you are discussing? from my point of view there is no reason to change anything regarding his strategy. assuming he is telling the truth then he managed to live off trading after 7 years with an initial capital of just 1000$.. why improve such a method? this is outstanding! i dont think he is living with just 500 or 1000$ the month so we can think of a decent amount of money he already gained. so why would you complicate it? let us just toss the coin and celebrate our winners ofc you can discuss...
Don't we all like easy approaches?

Unfortunately profiting from FX market, is never easy. Even with tried and tested strategies, we still have to go through the heart stopping part of entering the trades and watching the results, and closing the trade out at the right time.

If we want an easy approach, just enter a short trade everytime for EURUSD a couple of minutes before every news releases with SL and TP and come back after 1 hour to see the results. My theory is this, EURUSD has been on a downward trend for quite some time, and it is even possible for the currency pair to reach parity at some point of time. I think the fundamentals for now favours the dollars against EUR, so it's probably better to go along with fundamentals.
  • #14,713
  • Nov 15, 2015 6:54pm Nov 15, 2015 6:54pm
Quoting Journeyman
{quote} Since about year 2009, most brokers do not allow hedging anymore, i.e. taking a long & short trade on the same currency pair, with the same account. The trade will end up getting netted off, usually you end up with no trades with a loss. I have been following this thread since the beginning, initially the idea was to put 2 pending order, one long & one short, but when the spread gets be triggered, and quickly get stopped out. So the hard part is finding the right balance of enough volatility, not risking too much capital, and yet able to...

Well first I would suggest getting a broker that allows you to hedge if that's what you want to do. I have 3...

All the issues about spreads and widening, etc. are irrelevant to whether you have a 1 sided entry or double sided.
If I have a long entry prior to news and a short, both with 18 pip s/l and spreads widen and take them out, they would do the same thing if I just had a long or a short. So if it's a spread widening issue, then it's the 18 pip s/l that's the problem, not 1 sided vs. 2 sided.

On the other hand, if an 18 pip s/l is sufficient to employ the strategy successfully (remember long or short is random) then why wouldn't it be just as sufficient for both ways. That way 1 side gets taken out for an 18 pip loss as the other side moves in the direction of it's t/p.

Now there may be another reason to not use the 2 sided approach, but as of yet it hasn't been mentioned.
  • #14,714
  • Nov 15, 2015 6:56pm Nov 15, 2015 6:56pm
Straddle is the way to go. This way you participate whether the price goes up or down...I've tried it a few times and it works.

An 18 pip stop loss is simply too tight to avoid the whipsaws that happen in news events like the NFP. It's wide enough to not have the order cancelled, but the volatility will most certainly hit your stop. I've had success using 30-40 pip SL during the NFP.
  • #14,715
  • Nov 16, 2015 1:31am Nov 16, 2015 1:31am
Quoting spyderman
{quote} Well first I would suggest getting a broker that allows you to hedge if that's what you want to do. I have 3... All the issues about spreads and widening, etc. are irrelevant to whether you have a 1 sided entry or double sided. If I have a long entry prior to news and a short, both with 18 pip s/l and spreads widen and take them out, they would do the same thing if I just had a long or a short. So if it's a spread widening issue, then it's the 18 pip s/l that's the problem, not 1 sided vs. 2 sided. On the other hand, if an 18 pip s/l is...
That's correct. If you do the math you see that no matter if you trade one or 2 sides you will have the same profits and losses due to tp and sl if you stay with your 50% win chance, with the upside that your gains and losses are not clumped together and that you can pretty much plan ahead.

Average winner 50 pips. Average looser 18 pips.

One sided
1. Win: + 50 pips
2. Loose: - 18 pips
-------------------
32

Two sided:
1. -18/2 + 50/2 = 16
2. -18/2 + 50/2 = 16
------------------------
32

Again if the double sided trade ends in a loose due to spread and slippage trading only one side (while you might win in the case you bet on the correct side) will still have a negative expectancy over the long run.

As the strategy is not complicated and was discussed over and over again I would like to shift the discussion to the topic of good brokers we can use for this strategy. As noted earlier I have been with Oanda for news trading so far but I would like to split my risk and spread my news trading capital to a few more companies. May I ask you guys what brokers you use to trade the news?
  • #14,716
  • Nov 16, 2015 6:35am Nov 16, 2015 6:35am
1. Has anyone traded news with an ECN broker? and if so, what's the spread and slippage situation?

2. It's very possible to have... let's say 30 pips slippage. Does anyone know why no broker let you chose a limit for slippage. For example I chose 10 pips max from my pennding order where the broker can find a counter-party, if not, they should not take my trade. I know abou liquidity and blah, blah, blah... but the broker puts your order at whatever price they want, usually very bad for the retail client, without asking ( I have experienced huge slippage on TP as well ). I guess no broker shows the retail clients the quotes recieved from their liquidity providers . And for DD brokers, who takes the opposite side of your trade, where is the slippage coming from? How do we know that those pips aren't going in their fat pockets? Has anyone tried to negotiate with their broker to limit the slippage on pending orders?
  • #14,717
  • Nov 16, 2015 7:01am Nov 16, 2015 7:01am
Quoting Kilian19
{quote} That's correct. If you do the math
Average winner 50 pips. Average looser 18 pips.
I would like to shift the discussion to the topic of good brokers we can use for this strategy. As noted earlier I have been with Oanda for news trading so far but I would like to split my risk and spread my news trading capital to a few more companies. May I ask you guys what brokers you use to trade the news?

Not to beat a dying horse but...the math isn't adding up. That's my point. If I have 1 news event this week...how do I maximise my return if the average winner is 50 and average loser is 18 then. That's a big if, but we're just talking the math right now.

1 sided. 50 pips when you guess right, loose 18 win you guess wrong. 32 pips profit over 2 news events
net profit is 16 pips per news event.
2 sided. 32 pips profit whichever way you trade. (i.e. 50 pips profit on your long and 18 pips loss on your short)
net profit is 32 pips per news event.

As far as brokers go, I trade primarily with Trader's Way. Not recommending, just fyi. I haven't been trading the news so I'll have to report on the spread and slippage. CAD Manufacturing is coming up shortly. Red news but not much of a mover. I'll watch and see what the spread does on U/Cad
  • #14,718
  • Nov 16, 2015 7:39am Nov 16, 2015 7:39am
Okay, so here's a little test drive on my ECN live account...for what it's worth...
Just for fun I did a pre news flip and it came up tails for short.

CAD manufacturing news.

Here's a shot of the Usd/Cad pair 2 minutes before news comes out on a 5m chart.
You can see there has been a little pre news movement. Spread is sitting at 1 pip.
In the couple of minutes before the news I saw it range from about 0.7 to 1.2 pips.
Attached Image (click to enlarge)
Click to Enlarge Name: USDCADiM5.png Size: 53 KB


Here is 1 minute before news. I've placed 2 opposite orders with virtually no discernible slippage.
Each has a 10 pip s/l and a 20 pip t/p.
Spread at this time is 1.6 pips.

Attached Image (click to enlarge)
Click to Enlarge Name: USDCADiM5b.png Size: 50 KB


Here is 1 minute after news. Actuals came in lower than projected so we should see a rise in price.
You can see a small initial spike then settled back for the moment.
Spread is now at 1.1 pips.

Attached Image (click to enlarge)
Click to Enlarge Name: USDCADiM5c.png Size: 50 KB
  • #14,719
  • Nov 16, 2015 7:43am Nov 16, 2015 7:43am
Quoting spyderman
Okay, so here's a little test drive on my ECN live account...for what it's worth...

Okay, so here's a shot 10 minutes after news.
Price moved up and hit the s/l on my short. (I would now be out of the trade if I had just taken the coin flip short)
Settled back down for the time being.

Attached Image (click to enlarge)
Click to Enlarge Name: USDCADdiM5.png Size: 41 KB


I have to head to my temp job (temp until I can figure out this trading gig...) so will have to update later.
  • #14,720
  • Nov 16, 2015 7:49am Nov 16, 2015 7:49am
Quoting spyderman
Okay, so here's a little test drive on my ECN live account...for what it's worth... Just for fun I did a pre news flip and it came up tails for short. CAD manufacturing news. Here's a shot of the Usd/Cad pair 2 minutes before news comes out on a 5m chart. You can see there has been a little pre news movement. Spread is sitting at 1 pip. In the couple of minutes before the news I saw it range from about 0.7 to 1.2 pips. {image} Here is 1 minute before news. I've placed 2 opposite orders with virtually no discernible slippage. Each has a...
Bit surprised how spread didnt kick you out of your short position instantly spyderman. I often get 10-15 pip spread spikes (only lasting for 2 to 3 secs) on news like this. And i pay commision also...
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