Straddle Trades and news
Hi all ,
This is a very common problem which many of us are unable to address.
There is an entry order called as OCO order, which means, One Cancel Other.
This type of order are very helpful in the scenario which you have stated above, where the direction is uncertain.
I use this, and to tel you, as compared to unidirectional trades, number of trades hitting the market move is 100% and success rate is also gud ( at the end of a certain time period, if you compare it with normal trade entries)
Hope this would help alot of traders
I agree
Although I don't trade the news, what you may do is to setup an advanced order
lets say crazy cat posts a trigger for a news release, also if you see on a 5 min chart a consolidation period this is also helpful for spacial recognition.
So in this case you could put your advanced order to buy just above lets say 10-15 pips above the consolidation, with an OCO which means (One order cancels the other) with a target of lets say 40 pips above your entry and your stop just to the back side of the consolidation.
So this is the first part of the order; and if the market shoots up, then you will be in with a buy, and your target and stop are automatically set.
Then you set and advanced order for the other direction as well.
Advanced order for a sell 10-15 pips below the consolidation, with OCO of lets say target of 40 pips below your entry and stop just to the top side of the consolidation.
I have used a stop of halfway point also right in the middle of the consolidation that works well also if the risk/reward does not match up to my equity rules.
Anyhow this does work well, and you can also setup just one advanced order with OCO and for your other order you can get in at the middle of the consolidation and simply open the order with and OCO that way if it does move in the direction of your open order then your already in the market a couple minutes prior to the release. And you will maximize profits.
But if it reverses then you also minimize loses on that order, however if it reverses then of course you may not have even been in that trade at all, but it's just another strategy to consider especially if the news really anticipates a general consensus on the direction then you may opt for that.
The only real big problem with this straddle is when it whipsaw's up and down and this could create a condition where your order is hit, and then stop gets hit, then your second order is hit and stop is hit - meaning 2 loses.
But typically you can keep your eye on things and as soon as your advanced order gets opened you could simply close all reversing positions.
- a third strategy would be to forget the second advanced order and just make your OCO stop a reversal and add and extra lot so that when your stop is hit, then it will open a position for 1 extra lot in the opposite direction.
Then you will have to set a OCO manually or close manually on the stop and target of the reversal order.
Anyhow, this should give some ideas to consider.
FYI I don't trade the news and don't straddle, but I have done it quit a bit with the straddle of the US 3am candle for 100 pips per trading day, but I can't get up that early, so I ditched the idea.
Anyhow happy trading
