trading the news

I’m sure quite a number of forex traders would agree with me when I say that the outrageous long candle sticks we see in charts (heading up or down) are mostly caused by news events. Trading the news needs a level of experience, practice and understanding like I earlier said in one of my previous post.

But guess what? I developed a method that works 75% of the time in trading the news if only you can be disciplined by adhering to each step strictly. How do I do this? It’s quite simple and I’ll try and explain it in its simplest terms

What to do:

1. Make sure you are in front of your desktop or laptop at least 10mins before a major news event is about to be released.

2. Read and understand the news you are currently expecting. When I say understand, I mean make sure you know if to go long or short based on the actual results that would be released at that time.

3. 5 minutes before the expected time, have your 1min & 5min charts opened, and keep them side by side so that you can view both at the same time.

4. Look closely at both charts immediately the time for the news is ripe. What are you looking for here? Very strong and immediate movements in the new candle formed.

Weather the movement is up or down, as long as there’s a very strong move (about 15pips move), then you know the news is worth some nice pips.

Note: You are not to enter a trade immediately you see the strong spike movement of price. Then now the question you’ll be asking is when do I enter?

Good! Go back to wherever you get your reliable news results from and check the actual result. The results should give you a clear idea if to go long or short. Then look closely at your 1min chart, wait for the close of the 2nd or 3rd candle (i.e. 2-3mins after the news) then enter your trade in the direction of apparent price direction.

Please note here also that price might as well decide to go in the opposite direction right after your enter the trade. Now in this situation, what I would do is to hedge. If you go back to your 5min chart and see that price is actually having an erratic dancing movement, you do either of these two things:

i) Leave your hedged trade with a stop loss of about 10-15pips.

ii) Or you could just as well stay out of the trade until price direction is confirmed. (recommended)

Some new or inexperienced news traders might have a problem determining if to go long or short based on the expected news results. Please don’t be discouraged, there’s hope. You can always check this site as often as possible (at the start of the day or during the trading day) as to know what to expect and possibly how many pips to aim for when the news comes out at my predicted values.

Usually, if price is quiet (i.e. movement of price is slow) 20-30mins before the news then the effect is expected to be strong and if not the opposite happens J