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How to trade the news

Discussion in 'Forex Articles' started by rpchost, Mar 15, 2008.

  1. rpchost

    rpchost Private

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    News Trading or (Trade the news technique) is a term which we always hear, in this article I will describe how I see Forex News Trading and how I trade the news; I tried forex news trading for many years and discovered great things; how to use economic reports and forex news along with technical analysis.

    In this article I will describe the most accurate and profitable FX techniques that each trader must use in his trades. First of all, we must use Technical and Fundamental analysis in our trades, we can’t rely on one without the other, we must use them both; Technical analysis analyses the history of the currency and predict the future price; each trader has a different forex strategy which he uses in analyzing the market, me too I have my own strategies and they are not hidden; you can check my forex forum and get whatever you want from it.

    Let’s talk now about the fundamental analysis, I tried most of fundamental and news trading techniques but I didn’t find them worthy, it is real that releasing news can affect a certain currency, but how it affects the currency and when it deviates that currency, some economic reports make the currency jump 100 pips during the first split second of the time release – you must pay for this kind of service (getting the data in the second of the release)

    In addition a report may affect a currency during the first 10 minutes or half hour but before it takes the right trend it can fluctuates up and down and may stop you out, many traders put entries above and below the price before 2 minutes of the release, and wait for the spike, but also it is not worthy method because it may happen that the news which deviate the currency doesn’t have enough power to hit the target or maybe the revision came opposite to the actual or the deviation between the actual and the forecast was not enough to enter a trade or maybe the report was released and the price was below a certain resistance which forbid the price to pass it, so you enter a LONG trade but you find that the price went up, then tests the resistance then turns back to the support level and stops you out.


    I faced a lot of these problems and you will face it too if you don’t follow the right technique while trading the news. My technique is very simple and effective:

    1 – Don’t trade all news trading reports, trade only those who create and define the direction of the trend (Interest rates, trade balance and NonFarm Payroll). Do not trade these news trading reports only because they are important it may happen that a report came better then expected but do not create a move. I enter a trade only if the actual data came much better or worse (good deviation) and the revised data came along with the actual data and there is no important conflicting report.

    2 – The other normal news trading reports are also important; they are used to confirm or to close a trade especially when we are in the beginning of a specific trade; If you have just entered a trade and your current profit is between -20 and 20 pips and a specific report is released and that report affects the currency you are trading then we close it because this report has a good probability to stop you out. When you gain a good number of pips then you may not rely on normal economic reports and rely only on technical analysis and continue your trade until you hit your target.

    Fundamental and news trading is a good technique but we must use it along with technical analysis, and we must take in consideration trading the important news reports, the deviation between actual and Consensus, the revised data, the conflicting news trading reports and the support and resistance levels.



    Author: Joe Chalhoub
    Website: Online forex trading | foreign exchange | free forex signals

    References:
    Free Forex Signal | free Automated Signals
    Economic calendar | Forex news | News trade
     
  2. george soros

    george soros Private

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    For those who are interested in trading the news get yourself Newstrader Pro. Its a great piece of kit and you'll be able to judge which news events are the best to trade. The one thing that's missing from the software is the ability to see what was happening before the news event but I'm preparing a website specifically for news traders which will build on this database.
     
  3. capro

    capro Recruit

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    i'm grateful

    thanks for that wonderful piece of information:eek:oh::cute:
     
  4. James Chidolue

    James Chidolue Recruit

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    Hello FPA,
    I really like this thread on news trading.I read an ebook titled "Amazing Forex System" and it uses a system that i enjoy so much.Eg. UK is to release PPI m/m today at 1.30pm gmt.U take the highest high and the lowest low between the 1.28pm candle and 1.29pm.
    Add 10 pips from the HH and subtract !0 pips from the LL.Place an entry order using those values and the stops would be HH-10 pips and LL-10 pips.
    Care should be taken to note the type of news that you trade.Tankan,Interest rates,Inflation data as well as NFP have been very good trades.

    Try it out.
     
  5. OzWizard

    OzWizard Corporal Punishment

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    When did you write this....


    .......????? Monday was PPI and it wasn't at 1:30! ????:confused:
     
  6. profitmaker

    profitmaker Recruit

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    The USD is falling on hard times, and right before the holiday season in the United States. The greenback has so far witnessed a sharp decrease in value against its currency counterparts. EUR USD is in a consolidation after the last bullish movement following the previous uptrend. However, there are some interesting issues in this scenario. The EUR did in fact make strong gains against the Dollar, but it remained flat against every other currency counterpart.
    This indicates two important pieces of information. First, this means the EUR did not move the EUR/USD pair, the USD did the moving. Second, it tells us the EUR is not moving much at all. This means the Euro-Zone economies are not having much of an impact on the value of its currency. The EUR may in fact be waiting for clear signs of direction from the United States' economy before picking a direction.

    Consequences Of Global Economy Deterioration « Jasonmcgraph’s Weblog
     
  7. mayorspread

    mayorspread Recruit

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    As we live in a connected world major currency can be related. British economic indicator can affect world economy as much as US indicator. When I started trading in Forex I thought I just had to worry about fundamental or indicators related to the pair I was trading. But as the time pass and we enter into recession time, I have realized that a decision in Japan can affect the result of an indicator in Europe. We are in a complex situation and we need to pay more attention to economic indicators, as results over decisions and expectations in major economies can have a great impact in every currency. The best pair to trade is the one you feel more confident with.
     
  8. mayorspread

    mayorspread Recruit

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    Unemployment Claims

    The release of the monthly employment report seemingly rivals the post-FOMC meeting press release as the single most anticipated economic event in the financial markets. Given its significance, therefore, it is probably not too surprising that economists and market participants try to anticipate changes in this and other labor market indicators. The report measures the total number of people currently unemployed who are eligible to receive unemployment insurance benefits.

    In relation to financial markets and particularly Forex market, we have seen that after Unemployment Claims’ announcement, the currency pair EUR/USD is affected in a particular pattern. A historical analysis during 3 months shows us that the influence of the Unemployment Claims moved the EUR/USD in an average of 400 pips each time.

    The effect of the announcement would influence the market in two ways:
    •When the announcement is higher than expected, the currency pair might react with an uptrend.
    •When the announcement is lower than expected, it would create a downtrend.

    Looking at 5 minutes timeframe, we set a 5 periods RSI at close with 30, 50, and 70 levels, which can give us a confirmation of the signal when the trend changes its direction. However, as most trend indicators this can only show us when the trend cross a level which not always takes place. We must wait for a few minutes, maybe a couple of candles, before taking a position. That way the target must be around an average of 200.

    In conclusion, we fix our entry point depending of the candles formation. We will enter when there are two candles formation in the same direction with a RSI or MACD cross confirmation. We then set a target depending on the amount of pips left to trade out of the 400 average. We can also use the Traling Stop algorithm in Metatrader 4 settings if we see a longer influence of the fundamental.

    We present a brief review of the Unemployment Claims weekly labor market data and its effect over EUR/USD currency pair. We then examine whether our strategy is useful for predicting the behavior of the market in this particular scenario.

    Check the whole strategy here:
    Unemployment Claims Strategy « MT4 Experts Advisor’s Blog
     
  9. vanes7

    vanes7 Private

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    I checked the blog website you are suggesting and it has been really useful, especially when setting up a fundamental strategy. besides, I’m exploring on the platform some pair trajectory to relate it with news and all that we consider is involved in fundamental analysis. For me, it’s the best way relating news and trading performances
     
  10. StxyLo

    StxyLo Recruit

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    Great analysis!!!
    It's amazing what you can do when you mix fundamental and technical analysis.
    It's something worthy of further study.
     

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