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Chapter 25, Part II. Buying and Selling 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

    Aug 28, 2009
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    The second important rule is “how big is the difference of actual data from consensus.” We might say that this is the core of news trading. Different data has its own crucial difference that can trigger the move on market. The less important the data, the greater difference is demanded by traders. Usually this difference is measured in percents. For instance, for NFP it could be just 10-15% difference and it could lead to a very significant short-term reaction on market, while for Housing starts indicator will be necessary to have at least a 25% difference. These numbers are just for illustration. I suppose that it will be your homework to investigate and find this “triggering difference” for major data.

    Pipruit: And how can I accomplish this?​

    Commander in Pips:
    Very simple. On historical chart find day of, say, NFP releases. Estimate, how different they were from expectation and estimate the move that has followed the release. So, you will estimate minimum required difference that leads to a significant move. Without this procedure you will not be able to apply next and most common way of news trading – fact number trading.

    This is the more common way to do news trading. Those traders who have done their homework on estimation of “triggering differences” for every major piece of data know what difference has to happen between actual and consensus numbers to lead to a significant move on the market. Before release time they have trading plans for a negative difference and for a positive. All that they have to do during release is assess the real number fast and fill the orders. If actual data shows not enough skew from consensus (less than necessary “triggering difference”), then they do nothing and skip that trade. This is called actual number trading, since you do not have any preliminary view and expectation about the number. You act by fact – in any direction, depending on actual data.

    Pipruit: Well, sounds interesting?​
    #1 Sive Morten, Dec 26, 2013
    Lasted edited by : Oct 2, 2016
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