How to determine the cause of a price spike

icwalter

Recruit
Messages
6
Hello all, this is my first post and while I know news will cause spikes in prices today I saw prices spike when there wasn't any news scheduled. Is there a way to know what caused the spike? I like to avoid opening positions around the time of a news release and the spikes today confused me since it wasn't during a news release. Any and all help is greatly appreciated.
Thanks all!

It may be normal but around 9:30 am eastern time this morning, three pairs that I was watching suddenly spiked 25+ pips within a matter of 20 minutes. I would really like to know the cause of the spikes.
- EURUSD @ 9:30 am went from an open of 1.22524 to a high of 1.22816 by 9:50
- USDCHF @ 9:30 am went from an open of 0.98004 to a low of 0.97879 by 9:50
- EURJPY @ 9:30 am went from an open of 97.052 to a high of 97.282 by 9:50
I know these aren't big moves but the crazy thing is that I opened a trade on all 3 at 9:30 and all 3 immediately went against me. I'm just trying to understand why and how to avoid such a thing in the future. I hope to learn from this. It just doesn't seem to be coincidence to me.

Thanks again.
 

f-man

4Xangels Representative
Messages
762
I am trading forex for a few years now and I have investigated spikes from time to time.
Many of the spikes do have reasons that you can finally explain the cause of the spike, but there are many spikes that remain a mystery.
Where are you reading the news, before attempting to investigate a spike? There are news that affect Forex, but are not listed in the "standard" news releases. The problem is, that if you start reading ALL possible news sources, you will not have time to trade anymore:)

EURUSD and USDCHF have almost 100% inverse correlation on the 60 minute chart, so if you are buying EURUSD and selling USDCHF and having a few pips TP and SL, you are actually taking a double trade.
Long term traders, take advantage of this correlation of the specific pairs.


 

icwalter

Recruit
Messages
6
Thanks f-man. I use the news calendar here at FPA or at ForexFactory, sometimes both to compare how each looks at the impact/importance. I'll remember the correlation between the two pairs for my future trading.
 

FringFX

Sergeant
Messages
391
You can check the news for possible reasons for price spikes, but not all spikes can be explained by news.
It is also possible that news is created to explain certain spikes.

by the way, a 25-pip spike is not extraordinary. several 100-plus pip spikes have already happened in the past, all within a few seconds or minutes.
 

Ifmyante

ReadTheMarkets.com Rep
Messages
4
Price moves from one Decision Point (DP) to the next. A decision point is a price where it has been decided in the past that an asset is too cheap or too expensive
Here's an example from yesterday
03-08-2012 09-56-25.jpg
03-08-2012 10-03-22.jpg
03-08-2012 10-11-34.jpg
 

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itkraze

Private, 1st Class
Messages
200
Forex is random, sometimes we may pick the cause of any spike afterward but it is not necessary to pick the cause of every spike that happens in this market. Market is not under anyone's control so we have to use proper money management and stop losses to avoid heavy losses in this situation.
 

Pharaoh

Colonel
Messages
19,959
Price moves from one Decision Point (DP) to the next. A decision point is a price where it has been decided in the past that an asset is too cheap or too expensive

Sort of like whenever I buy gold. The market decides that me buying is an obvious sign that gold is too expensive and price takes a dive. :p
 

Rambo35

Corporal
Messages
280
Sort of like whenever I buy gold. The market decides that me buying is an obvious sign that gold is too expensive and price takes a dive. :p

Hahaha, that cracked me up Pharaoh. Sometimes I think the market is waiting for me to enter an order and we play a game of chicken. Joke aside, it does happen sometimes to every trader :).
 

itkraze

Private, 1st Class
Messages
200
Why do you want to know the reason for any or all price spikes. You can trade on longer time frames to avoid such situations or you can check through any news site to avoid trading near high news impact.
 
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