Trading The News

[Ricex]

This post has come about from a casual observation of what new traders seem to be doing a lot of at the moment, and that's trading the news. It's pretty much the first port of call these days for a debutant.

Now I don't want to get all judgmental about this, I can see the attraction of watching a pair soar 30, 40, 50 pips in less than a minute and then thinking how can I profit from this?, how can I get a piece of that action?, that's perfectly understandable. It may even look to some like the only way to make money out of forex, which I think is a shame. It has excitement and makes you feel like a real trader..... in a kind of playstation type way.

The voices that say everybody trade the news have become much louder of late, and they sell a compelling story to inexperienced minds, but I think they sell only half the story.

Money can be made from news trading of course but it is really an advanced style of trading, it requires experience and investment to really work on a level that could be worthwhile or considered worthy of being integrated into your business plan.

The majority of FPA members seem to come here for the free news signals which is a great resource, but how many of you could trade these announcements without this service? I know I couldn't, and if the guys decided to close shop tomorrow what would happen to your trading? are you an independent trader or are you just taking tips on a horse race?

The actual technical side of trying to place a news trade is the side of the story least talked about. Slippage, getting filled at a different price, increased spreads, locked platforms, all common realities of news trading. What we as traders have to ask ourselves every time we trade is "what is the risk involved here?" "are the odds in my favor?"

I would not put news trading on my least risky list.

Nobody likes to hear it but I'm going to say it anyway, there are no short cuts in trading, there are no magic beans, you have to know what your doing and to know what your doing you have to work hard at it.

(there told you you didn't want to hear that )

 

[Pharaoh]

Overall, I think that's a really good warning. So many people come in expecting to score 100% of available pips from news trading. It's not that easy. Even in a live trading room full of experienced traders led by Sir Pipsalot, the amount made by individuals varies. Broker selection and connection speed can make a HUGE difference.

Before anyone else asks. Yes, there are brokers you can spike trade with. No, I'm not going to list them. The list varies over time. If 20 small traders out of thousands of customers spike trade, the broker may not notice. If that number suddenly goes up to 100 and the lot sizes increase, the broker will notice. Suddenly, the rules will change or else those accounts will find themselves requoted to death.

Even purely technical traders can find the FPA's signals to be useful. Any news event considered to be "hot" is one where technical traders need to close positions or tighten up their stoploss settings. To a technical trader, a big news release is a potential bomb that can ruin what little predictability the market has.

 

[Forexwatchman]

The last part of your comment rings true for me and my early trading days. Back then I was too overwhelmed by the huge volume of indicators and technical jargon to also try and pay close attention to news events and how they effect currencies. I didn't give much weight to news events until I began to notice those seemingly random huge spikes in price that either stopped me out or earned me some extra pips.

Actually Pharaoh it was when I started reading your daily signals that I realized how much of an impact the news has and how important it is to include it in your own daily trading strategies. And this doesn't mean you have to trade the events themselves either, you can simply look at the upcoming events for the week and factor them into your trading week. Close positions before a major news event, or don't enter until afterwards. Basically just be aware of them and the impact that they have.
I do trade the major US news events like the NFP and Retail Sales events, but only if they are clear signals which the last two have been, and also i should mention those news events signaled the downfall in the EUR ever since the NFP came out better than expected.

 

[pahj]

forex trading is not a hubby, its real biz, and any one in biz is there to make money,my personal opinion though don't know about others,if you can make money tru news i don't see any thing wrong in it. we should all take advantage of the opportunities we see,free signal, robot, trading room etc as long as you smile to the bank,SO GUYS LET THE MONEY KEEP FLOWING, WHAT DO YOU THINK???????????????????????????

 

[Ricex]

As I said I wasn't judging news trades as wrong, I was pointing out that it is not quite as simple as some people with limited experience may think. With all trading there is a risk and it is our job as traders to limit that risk, and to fully understand the type of trade we are about to take, if you don't you are gambling.

I'm just trying to make anybody who will listen to me think twice and to take a step back for a moment. The thought process of a professional trader is always geared towards the potential loss, not the pot of gold.

 

[Eric Alyea]

Margin call ambush

Sounds like a good way to set your self up for an ambush “Margin call”.
Isn’t this where you yell discipline stick with your training.
The number of rounds (bullets) shot in combat do not equal production i.e. dead, (unless it’s a sniper)
How do you schedule a stop loss to go from the peak of the trade chart.
After you climb a real mountain that is just half the job.
You have to come back down to live with the experience (i.e cash out your pips).
Real life to forex Opps my bad.

Watch out when I get my new glasses and can read again.