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

Discussion in 'Complete Trading Education- Forex Military School' started by Administrator, Feb 8, 2012.

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  1. Administrator

    Administrator Just Administrator :-)

    Sep 24, 2007
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    Part II. Buying and Selling the News. [​IMG]

    Commander in Pips: So, let’s pass right to the trading process of news. In fact, you may apply two different type of trading – rumors trading and fact/actual number trading. Both of them are based on a very important number called consensus data value.

    Pipruit: And what it is?​


    Commander in Pips: Consensus value is some kind of average view of large market participants on an expected data release. Usually 2-3 weeks before release many business media start to announce the opinion of different big market participants on expected data, say, JP Morgan, UBS and others analyst opinions. Usually the number of respondents is bout 10-20 companies. Their views could be and will be different, but all their numbers will stand mostly around some average – that is a consensus. At least most of them will tell that they expect increase or decrease of some data, although the particular number could be different. Some companies will be more aggressive on forecasts while others more conservative. Consensus number is crucial for news trading. By the way, we’ve already spoken about that, when we first discussed fundamental analysis.

    Pipruit: Yes, I remember that.
    Commander in Pips: So, how can you apply rumors trading? Just join to major participants. Since they have definite expectations on some data, and they have really huge long-term positions, they will adjust them according to their expectation prior to when the release will happen. Usually this process lasts 1-1.5 weeks before the release data.

    Pipruit: And why they can’t do it right after the release?​

    Commander in Pips: Think by yourself – they are 60% of overall Forex trades. If this huge mass of money comes flooding in all at once – what will happen on the market? This is absolutely unwelcome for big banks. They can do this gradually on calm markets with low volatility days. This is more preferable than turning over huge position in doom & gloom, because that will cost much more money.

    Pipruit: I see. And what next?​
    #1 Administrator, Feb 8, 2012
    Lasted edited by : Oct 2, 2016
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