Trading the News

[dave alexander]

I watched with interest the effect on the currency pair AUS/USD when the Australian Employment news came out. I have a couple of questions if someone can help me out. I assume you would be trading the 1 minute chart but in terms of knowing whether to go long or short, do you wait and see how the market is reacting then take a trade or should you take a position before the news release to avoid the widened spreads and slippage or is this not an issue because if you are wrong on the position you take before the news release it could be a whole lot worse than the spread and slippage issues.

 

[clem699]

I watched with interest the effect on the currency pair AUS/USD when the Australian Employment news came out. I have a couple of questions if someone can help me out. I assume you would be trading the 1 minute chart but in terms of knowing whether to go long or short, do you wait and see how the market is reacting then take a trade or should you take a position before the news release to avoid the widened spreads and slippage or is this not an issue because if you are wrong on the position you take before the news release it could be a whole lot worse than the spread and slippage issues.

The little knowledge i have about news trading is that you should be able to get the news information before every other person so as to partake on the noise(volatility)it would create.You should also make up your mind whether you want to trade news or impact of the news.If you want to trade news, then you need to be in the trade as early as the news is released but for me,trading impact of the news is safer.Well,as per taking position,whether to buy or sell, i think that as to do with your level of experience,information and exposure at your disposal.To be honest with you,trading news release is very risky and should only be for sophisticated people.

I hope this information is useful to you.

 

[Ricex]

The important parts of news is the previous figure and the expected figure. What news traders are hoping for is a significant difference from the expected figure, either much higher or much lower. This difference is called the deviation or trigger and is the minimum for the trade to be activated. If this is not reached then the trade should be abandoned as there will likely be little or no reaction from the market.

Experience and study of previous reports will allow you to come up with how much deviation from the expected figure you will need to see a decent move.

With this in mind it would be difficult to take a position before the event. You could however make an educated guess as to what may happen in advance and plan your trade accordingly risking a certain amount as you would in any trade and hopefully avoiding larger spreads, or you could just try and hit it as quickly as you can when you see the price move, this of course has other broker associated risks attached, and I don't recommend it.

Finally you could let all the dust settle and trade the aftermath. Depending on the type of news release and it's acceptance or not by the market a lot of price action after the event will return to the starting point as if nothing had happened. You can sometimes ironicaly make more pips this way.

Start practicing with the FPA news signals which are free and offer a lot of insight into each and every trade.

To be honest with you,trading news release is very risky and should only be for sophisticated people.

haha! love it clem699, made my day.

 

[dave alexander]

Thanks

Thanks for the comments and advice guys, they were very helpful and I am working on my sofisteekation levels as we speak. Cheers.