News Driven Trading Strategy

 

Trading Strategies for News Announcements

 

One of the most popular ways in FX trading is to trade when news is released. It is intriguing to many people as it has quick results for traders. Traders will feel their hearts bumping every moment while watching the position details before the news is released, and they will feel joy or disappointment at the results as soon as the news is released.

Traders who want to win in a short period of the time prefer this trading technique. The news trading strategy is based on the idea that when the actual value of economic indicators differs significantly from expectations, the market reacts immediately, resulting in a trend break. There are various news trading techniques, but traders can suffer huge losses if they are misused.

 

What Are The New Trading Strategies?

 

1. Entering the market before indicators are published!

 

  • The most significant advantage of the No. 1 strategy is that it has a high risk-to-profit potential.
  • The spread expansion phenomenon is usually ahead of the announcement of economic indicators.
  • Traders who enter the market in advance without waiting for about five minutes catch the phenomenon as an opportunity.

2. Entering the market after indicators are published!

 

  • Once economic indicators are published, they can lead to drastic changes in prices and realise significant returns.
  • If the opposite indicators are published, traders can minimise the loss by using stop orders.

  • In other words, if the prediction is correct, make a profit and if wrong, clear the position immediately.

     

3. Mix the before and the after publishment!

 

  • Using both methods can reduce the risks but can not ensure that the trading is successful due to huge volatility.

 

Trading Method for Proactive Trading

 

 

BUY

 

 

1. Enter the buying position 20 minutes before the major news release. It helps you enter the position when the spread is relatively tight. Also, entering the position 20 minutes before the major news release enables you to focus on the news scheduled to be released.

2. Place a stop order 10 ~ 30 pips above the entering price within the range. Range means the last two hours of price variation and, if such a range is very narrow, the upper and lower movement of the price is applied. The purpose of this rule is to minimise risk.

3. If the price changes as predicted, close half of the position when it reaches the stop order level. This allows some profit to be obtained, eliminating the burden of loss on the remaining positions.

4. For the remaining positions, use the trailing stop or set the stop order three times the initial stop order level.

 

SELL

 

 

1. Enter the selling position 20 minutes before the major news release. It helps you enter the position when the spread is relatively tight.

2. Place a stop order 10 ~ 30 pips below the entering price within the range. Range means the last two hours of price variation and, if such a range is very narrow, the upper and lower movement of the price is applied. The purpose of this rule is to minimise risk.

3. If the price changes as predicted, close half of the position when it reaches the stop order level. This allows some profit to be obtained, eliminating the burden of loss on the remaining positions.

4. For the remaining positions, use the trailing stop or set the stop order three times the initial stop order level.

 

 

 

 

Trading Method for Reactive trading

 

 

BUY

 

1. Enter a buying position after 5 minutes of the major news release. It is possible to determine whether a sudden price reversal occurs immediately after the news release. If the index report differs significantly from the forecast, it may take more than 5 minutes to adjust the market.

2. Place a stop order above the entering price when news release. If the bid of a pair of currencies falls to the lowest point of the candle, it is interpreted that the market is not affected by the index release despite positive indicator results.

3. If the price increases by the stop order, close half of the position. Obtain a certain amount of profit in advance to reversal and explore additional profit opportunities.

4. Use the 20-day moving average for the remaining positions to enter the trailing stop or set the stop order.

 

SELL

 

 

1. After 5 minutes of the major news release, enter the selling position.

2. Place a stop order below the selling price when news release.

3. If the price drops by the stop order price, close half of the position.

4. Use the 20-day moving average for the remaining positions to trailing stop or set the stop order.

Although reactive news trading does not require more prediction than Proactive news trading, this strategy may be burdensome for some traders due to its much wider stop-set distance. It may also take hours to reach the first target as prices move later than expected.

On the other hand, proactive news trading can easily reach its first target within five minutes of the announcement and settle half of its position when it reaches the expectations. Since then, even if the other half of the positions remain open for several hours, there is less risk of loss because the stop order is already set at the initial entry price.

Of course, both tradings has trapped. Therefore, using a combination of two strategies would be the best strategy. Although it would be difficult to predict the results of all economic indicators, some specific indicators would be predictable.

 

 

 

Proactive + Trade Method for Reactive Trading

 

 

 

BUY

 

1. Place buying order for half of the positions at least 20 minutes before the major news release.

2. Enter a stop order in the range of 10 ~ 30 pips below the entry line.

3. If the direction of the market is consistent after the economic indicators are released, enter the other half of the positions five minutes after the announcement.

4. Set the take profit order 45pips above the second entry price.

5. Half of the position will be liquidated if the position reaches the targeted price.

6. For the other half of the position, use a simple 20-day average to set up a trailing order.

 

SELL

 

 

1. Place selling order for half of the positions at least 20 minutes before the major news release.

2. Enter a stop order in the range of 10 ~ 30 pips above the entry line.

3. If the direction of the market is consistent after the economic indicators are released, enter the other half of the positions five minutes after the announcement.

4. Set the take profit order 45pips below the second entry price.

5. Half of the position will be liquidated if the position reaches the targeted price.

6. For the other half of the position, use a simple 20-day average to set up a trailing order.