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Chapter 25, Part II. Buying and Selling the News. Page 7

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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    From that conclusion you understand, that even small upward surprise will not lead to strong strengthening in the USD and you may count on only a small move. That’s why you apply intraday strategy.

    Let’s just assume (although it is not) that this is EUR/USD chart right at release moment of Retail Sales:

    Chart #1 | Hourly EUR/USD

    Since you know the direction (down of EUR/USD), you still have to do some technical work, since you have to estimate an entry point and potential target. Observation of price action during previous hours before release will help you. Since you do not expect a significant move, just light reaction on data, you apply an hourly chart. Here we see that the market stands in a rectangle and apply classical rule of trading it – move after breakout should be equal to the width of rectangle.

    To avoid double losses, you place Stop entry order at the downward breakout of the rectangle, stop above the upper border, target – at 1.3680 – 68 pips lower of lower border.

    At the release moment the market shows a solid move down and triggers your entry order. You may want to shift your stop loss order inside the rectangle right above the high of the thrusting bearish candle.

    This way of data trading gives you some psychological advance, since you will not be forced to act during the release and halve already made all preparations in advance. In the moment of release you will be just watching the development of the situation.

    Some time later, you’ve got your profit taking order. So, your trade was successful this time.

    Chart #2 | Hourly EUR/USD

    But major idea of that example is:

    If you plan to trade news directionally, you have to look deeper inside the numbers to understand the overall process and information for a particular report, not just compare it with consensus forecast. Otherwise, you may fall to very unpleasant trades.

    Hopefully we have Stavro D'Amore who can lead us through this process unharmed.
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