Predicting direction of economic releases | Forex Factory

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Predicting direction of economic releases

  • #1
  • First Post: Sep 6, 2006 9:44pm Sep 6, 2006 9:44pm
Forget about what you have heard on some magical trading system. There is no magic involved in this system and I've been successful in my trading. Fundamentals is a high risk, high reward form of trading. I've read postings about companies doing stop hunting, increasing spreads, etc. I'm here to tell you that you can trade pre-volatility and maximize the number of pips on news announcements. No more hedging and straddle nonsense. News for intelligent, thinking people.

Basic principle: A strong US expectation makes the USD go up. A weak US expectation makes the USD go down.

For example: Prior to September 1st nonfarm payroll, the media announced that the USD gained strength overnight against the JPY. Since I play the EUR/USD, it told me that the USD was going up therefore the EUR must head down. I played a Sell order on the EUR/USD for the nonfarm payroll and it went in the correct direction for a nice profit.

Common Knowledge: Speculating on the JPY is difficult because the Japanese government provides pre-release reports that slows down volatility. The US, UK, and EUR markets do the same thing but no through government. We have the business media but we don't use it properly. The business media is always trying to gain market share over the competition. They are the best source to let us know what is going on.

Suggestions (not an endorsement): Read Business Week, the Wall Street Journal, the New York Times, or the Investor's Business Daily. Listen to Bloomberg Radio. Watch Bloomberg Television and CNN. Keep informed.

This is how I get advanced predictions before market volatility for an announcement. This works for me and it should work for you.

Please let me know your successes.
  • #2
  • Sep 6, 2006 9:54pm Sep 6, 2006 9:54pm
Absolutely right on target, atleast now I know someone who trades my way.
  • #3
  • Sep 6, 2006 11:49pm Sep 6, 2006 11:49pm
I have heard so much about Big Guru's predictions going wrong, it makes me curious about the Hit ratio you guys have (number of winners/number of losers). Care to share?


I personally trade after the news in the direction the news suggests and try to enter before the spike or at an early stage of the spike if the news deviates enough from consensus.
  • #4
  • Edited 1:40am Sep 7, 2006 1:30am | Edited 1:40am
Quoting kazi67
I have heard so much about Big Guru's predictions going wrong, it makes me curious about the Hit ratio you guys have (number of winners/number of losers). Care to share?


I personally trade after the news in the direction the news suggests and try to enter before the spike or at an early stage of the spike if the news deviates enough from consensus.
During the last few days, I've predicted the correct direction of both reports on 9/5 on the AUD/USD. I've also predicted the correct direction of the USD/JPY and USD/CAD on 9/6 but the incorrect direction on the EUR/USD and GBP/USD because I could not take into account of the reaction of Tony Blair's resignation. Today, 9/7, I also predicted the correct direction for the CHF GDP release at 1:45 AM EDT.

The above predictions were sent to Merlin, who can verify my claims before volatility happened. Sometimes I can make a mistake so it isn't a perfect record but I feel it is damn close. For the 12 months before this month, I had a perfect prediction record. This can be verified by an outside source but I cannot name the source as it violates the rules of posting.

Warning: Past predictions are not an indicator of future success.

The problem with trading after the news release is that many brokers will not guarantee orders during high volatility. I've read others complain of increased pip spreads, hedging with 2 accounts, etc. Personally, I think it is a load of crap. Straddle trading may still work but I prefer to do things my way.

Try trading the news on your demo account for a month or two before actually trading on your real account. Pre-release news is always available. For example, some entity has moved ahead of the release of some report due out. I feel that an entity that moves ahead of a news release has to know something ahead of everyone else - inside information? Perhaps.

Let me know your experiences.
  • #5
  • Sep 7, 2006 1:47am Sep 7, 2006 1:47am
Thanks for sharing. In my opinion you should take this a step further and post your thinking in advance before these announcements take place. In other words tell us what positions you are taking or going to take before the news releases. And to really add value to your thread it would be very informative if you can tell the reasons behind your thinking. You talk about stuff which is happening before the news releases which help you making these decisions. It would be nice if you are more spesific and share everything.
Never Ever Give Up!
  • #6
  • Edited 2:01am Sep 7, 2006 1:53am | Edited 2:01am
Quoting Cobra
Thanks for sharing. In my opinion you should take this a step further and post your thinking in advance before these announcements take place. In other words tell us what positions you are taking or going to take before the news releases. And to really add value to your thread it would be very informative if you can tell the reasons behind your thinking. You talk about stuff which is happening before the news releases which help you making these decisions. It would be nice if you are more spesific and share everything.
Cobra, my predictions are being used by several forex and futures member sites. I provide such information for them.

My analysis takes a couple of hours to gather but is finalized in the last 20 to 30 minutes before the actual trade happens.

As a full time currency speculator, I would not have enough time to do everything through the sites that pay me and provide a detailed analysis for this discussion board.

If you or any of our fellow community members have a suggestion of a preset format that would allow me to do this within minutes, I'll consider it.

Here is something that would really help you understand my thinking prior to a trade:

1. Read my posting above.
2. If your trading platform provides news, read it. Indications of movement are everywhere.
3. Use the buddy system - Talk with traders to get a consensus of the what the news is saying and make a decision about the currency pair and trade you are doing.
4. Make the trade. Don't get emotional about it. If it goes against you, get out. If it is in your favor, stay in the trade until the movement stops and hangs or decide to get out if it backs up by 5 pips.

Remember: Minimize Losses And Maximize Returns
  • #7
  • Sep 7, 2006 2:10am Sep 7, 2006 2:10am
I think everybody would be interested in getting more from you.

I am calling on the administrators of FF to help. Maybe we can put something together for the benifit of all. Thanks again for be willing to share.
Never Ever Give Up!
  • #8
  • Sep 7, 2006 2:23am Sep 7, 2006 2:23am
Quoting Cobra
I think everybody would be interested in getting more from you.

I am calling on the administrators of FF to help. Maybe we can put something together for the benifit of all. Thanks again for be willing to share.
Merlin suggest earlier today that I post my AUD/USD trade before volatility but I didn't have enough time. I had about 5 minutes and I needed to get my trade into the platform.

I will try to post trade predictions in the Forex News and Press when I have time before an announcement. My trades are eastern daylight time so please keep that in mind when you trade.

San Fran Fed President Yellen Speaks this afternoon but I will not be trading this. I never trade speeches. Well maybe when President Bush speaks like during the Beige Book Report earlier in the day. Seems like when Bush speaks, the USD falls.
  • #9
  • Sep 7, 2006 2:42am Sep 7, 2006 2:42am
Quoting ngdaniel
Try trading the news on your demo account for a month or two before actually trading on your real account. Pre-release news is always available. For example, some entity has moved ahead of the release of some report due out. I feel that an entity that moves ahead of a news release has to know something ahead of everyone else - inside information? Perhaps.

Let me know your experiences.
Spooky this!!!
I'm very much a newbie to FX and have never traded the news before last week. I played the retracement and did OK. It seems easier than trying to guess up or down.
What's spooky is the timing of your post. I had been giving some thought to taking a fresh approach to news-trading and, without anything like your level of expertise, had started to test a theory.
Giving it some thought, and being a cynical sort of guy, I worked on the assumption that insider trading happens anywhere large amounts of money are concerned.
I looked at it this way - if borkers are stop hunting UP it may be reasonable to assume that they may believe (through their closeness to the banking fraternity) that the price will DROP and vice-versa.
So, I will demo this approach for a while, coupled with your input in this thread.
Maybe I'm being naive in this, your thoughts would be appreciated.
Peter
  • #10
  • Sep 7, 2006 6:37am Sep 7, 2006 6:37am
although daniel hasnt proven his prediction capabilities, i have been impressed with some of the calls he has made. looking foward to further predictions...
Relax and be happy.
  • #11
  • Sep 7, 2006 7:46am Sep 7, 2006 7:46am
so to break even with this style of news trading, approximately what % of the time would you estimate that you have to make a correct call?
  • #12
  • Sep 7, 2006 9:12am Sep 7, 2006 9:12am
Quoting PeterFM
Spooky this!!!
I'm very much a newbie to FX and have never traded the news before last week. I played the retracement and did OK. It seems easier than trying to guess up or down.
What's spooky is the timing of your post. I had been giving some thought to taking a fresh approach to news-trading and, without anything like your level of expertise, had started to test a theory.
Giving it some thought, and being a cynical sort of guy, I worked on the assumption that insider trading happens anywhere large amounts of money are concerned.
I looked at it this way - if borkers are stop hunting UP it may be reasonable to assume that they may believe (through their closeness to the banking fraternity) that the price will DROP and vice-versa.
So, I will demo this approach for a while, coupled with your input in this thread.
Maybe I'm being naive in this, your thoughts would be appreciated.
Peter
Peter, Do whatever works for you. If your test works, keep doing it and show the community your results. If I can help, let me know. I have found that entries are easier when you are in the right direction or it could be a psychological thing. Keep testing until it works 80% of the time for you. Don't use real money until you have a successful demo record.
  • #13
  • Sep 7, 2006 9:14am Sep 7, 2006 9:14am
Quoting ycomp
so to break even with this style of news trading, approximately what % of the time would you estimate that you have to make a correct call?
I'm sorry but I cannot answer your question. There are many factors to consider when trying to break even.

If someone can answer this vague enquiry, please do so. I can't with the limited information you have provided.
  • #14
  • Sep 7, 2006 9:30am Sep 7, 2006 9:30am
basically what I was getting at is that as long as you are right 50% of the time, you should be ok?


Quoting ngdaniel
I'm sorry but I cannot answer your question. There are many factors to consider when trying to break even.

If someone can answer this vague enquiry, please do so. I can't with the limited information you have provided.
  • #15
  • Sep 7, 2006 9:40am Sep 7, 2006 9:40am
Quoting ycomp
basically what I was getting at is that as long as you are right 50% of the time, you should be ok?
Every call you make on direction is a 50-50 chance. I would say that as long as you are 80% correct, you should be okay because:

Let's say you start off with $1000 and you lost 50%, you would have $500 left over.

What percentage would you need to recover your original amount? Not 50%.

Answer: You have $500 and need to gain 100% to recover your original amount of $1000.

One of the problems of break even analysis in forex is your ability to trade is not a constant. I hope you can understand this example.
  • #16
  • Sep 7, 2006 10:00am Sep 7, 2006 10:00am
Hi... yes I always use this example also. However I'm thinking of trading news for income supplementation, not for capital growth. Therefore for my situation this calculation wouldn't apply.

I would just trade the same lot sizes all the time. If I get wiped out then I would reseed my account. Of course this can't be done if we are talking about large accounts. But if my account was seeded with $2000. Then that of course is a different story. If one were to lose $2000 completely, it is not so bad.

So in this case where we are not paying attention to growth of the account (or preservation of the account). But rather using fixed lot sizes, then I should be able to survive with a lower sucess ratio.

Quoting ngdaniel
Let's say you start off with $1000 and you lost 50%, you would have $500 left over.

What percentage would you need to recover your original amount? Not 50%.
  • #17
  • Sep 7, 2006 11:38am Sep 7, 2006 11:38am
@ngdaniel: I am not sure if I got it... Do you make your own predictions or do you trade in direction to the forecasts? I heard about the following strategy, e.g.:

NFP: previous 120K, forecast: 95K

Now you place a long trade in the Euro because the forecasts show a weaker US-economy and therefore a weaker USD. The "System" is always trading in the forecasts' direction.

Is that comparable to what you are doing? If yes, WHEN do you place the trade? The forecasts are known by everybody long time before the news come out. So I am not really sure what predictions you are making for your trades.

Thanks!
  • #18
  • Sep 7, 2006 2:24pm Sep 7, 2006 2:24pm
Wow this was great advice !! I was watching the news ntworks, and the general consensus was that the dollar would strenghten for the day. I remembered reading this thread and came back to it and thought what the hell I'll give it a go with a few mini lots on USD/CAD (IVEY PMI news announcement). I went long a few minutes before the news came out (with 10 pit stop loss behind it of course). WHEN THE ANNOUCMENT CAME OUT I ALMOST FELL OF MY CHAIR!!! THE NEWS WENT LONG!!! I left it in for the hour (I'm a noob to trading and wasn't expecting this) and came out 30+ pips for one day ON THAT ONE TREAD!

Needless to say, I'm good for the week!
Although I don't know if this happens like that all the time, I'll definitely pay more attention to news (and try to play news trades more often). Maybe I heard to right things at the right moment, I dunno... time will tell.
THANKS FOR THE GREAT TIP!!!
  • #19
  • Sep 7, 2006 3:08pm Sep 7, 2006 3:08pm
Quoting cinegel
Wow this was great advice !! I was watching the news ntworks, and the general consensus was that the dollar would strenghten for the day. I remembered reading this thread and came back to it and thought what the hell I'll give it a go with a few mini lots on USD/CAD (IVEY PMI news announcement). I went long a few minutes before the news came out (with 10 pit stop loss behind it of course). WHEN THE ANNOUCMENT CAME OUT I ALMOST FELL OF MY CHAIR!!! THE NEWS WENT LONG!!! I left it in for the hour (I'm a noob to trading and wasn't expecting this) and came out 30+ pips for one day ON THAT ONE TREAD!

Needless to say, I'm good for the week!
Although I don't know if this happens like that all the time, I'll definitely pay more attention to news (and try to play news trades more often). Maybe I heard to right things at the right moment, I dunno... time will tell.
THANKS FOR THE GREAT TIP!!!
Great work!! You are now part of an elite group of individuals who think for themselves rather than rely on some system of trading. As you can see, the media tells you the direction of currency for the day. You are not only doing it, you are doing it right. Keep up the good work and make as many happy pips as you can.

For the rest of you: Read, listen, and watch the financial news. The reason a major player moves in a certain direction ahead of a news announcement is because they know something that the rest of us don't. They also create a headline to show they are a superior investment and that you should trust your money with them. I take the view that they know something but 'showed their cards early'.
  • #20
  • Sep 7, 2006 3:11pm Sep 7, 2006 3:11pm
Quoting more
@ngdaniel: I am not sure if I got it... Do you make your own predictions or do you trade in direction to the forecasts? I heard about the following strategy, e.g.:

NFP: previous 120K, forecast: 95K

Now you place a long trade in the Euro because the forecasts show a weaker US-economy and therefore a weaker USD. The "System" is always trading in the forecasts' direction.

Is that comparable to what you are doing? If yes, WHEN do you place the trade? The forecasts are known by everybody long time before the news come out. So I am not really sure what predictions you are making for your trades.

Thanks!
I think there is more research required than just looking at the FF calendar.
You'll need to do more in-depth reseach than that.
Look at the original post and see the range of sources outlined, for example I went to Bloomberg's site and you can get TV webcasts of analysis.
It's a start anyway
Peter
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