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Chapter 25, Part I. Dealing with the News. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 26, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Specific and risks of news trading

    Commander in Pips: The attractiveness of news trading is that after release you may expect a strong and relatively stable move, if news are significant and strong (negative or positive). Your task sounds simple – put your orders on the right side of the market and join the move.

    Now about the risks – they are specific for the over-the-counter market and we’ve partially talked about them during comparison of stock and forex markets:

    1. During the news release broker could increase bid/ask spread, so your expenditures will become greater, but this is usually just minor problem, compared to others;

    2. You could meet with delay in your order execution. For instance, you want to make a long buy entry – you press the buttons but could get the confirmation from broker. Then you did it again and again, when finally get the confirmation. But simultaneously you see that all others attempts were executed as well. This looks impressive if you’re on the right side of the market, but what if you are on the wrong side?

    3. Third problem is a slippage that could be combined with delay as well. You press button to buy at 1.4325, but your order has been executed at 1.4380, for instance. When you see it - market already at 1.4290 and broker has executed right at top of some fake out due volatility splash…;

    4. Quotes reality will be under question, since market is OTC one, any broker could give you its own quotes and they will be real one, despite how different they will be from other brokers.

    In general, the major risk of news trading comes from another additional component – time. The direct move due to news release lasts for some time that is not very extended. So you have to get your order placed in time to use the advantage of news release.
     
    #1 Sive Morten, Dec 26, 2013
    Lasted edited by : Oct 2, 2016
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