Ok, I understand. News trading is exciting, it’s a rush, it’s big money in a short amount of time. I agree with you. It reminds me of Vegas without the free drinks and the scantily clad cocktail waitresses. Some people avoid the major news reports because of this considering it too much of a gamble. They wait until the market is quiet to trade. What? Isn’t volatility what we need in the market to make money? There is no better time than trading the Forex news reports if done properly. This is Part I of a 5 part series on news trading. Before the News – The Golden Question Which way is the market heading once that news report is released? If I knew the answer, I’d have more money than Bill Gates. Even though we have 1 specific tool available in our charting package that shows how the large institutions (the “smart money”) are aligning themselves before the news report release, nobody knows for sure which way the market will pop. The best play here would be to hedge and go long and short the same currency pair. You need to place your orders 3-5 minutes before the news report comes out. If you wait until the report is released, forget about placing an order, the opportunity is gone. The nice thing is you can place all your orders, including stops and profit targets, before the news report and then sit back and let the trade unfold. By doing this, you’ve done what 95% of traders can’t do – take the emotion out of trading. So, let’s take the EUR/USD as an example. It’s 8:25 AM EST and the Non Farm Payroll is coming out. You have been waiting all month for this, you even got a new 23 inch monitor for it because this trade will pay for it. If the EUR/USD is trading at 1.3400, you will place the following trades: Short EUR/USD at 1.3400 with a stop loss at 1.3425 and a profit limit of 1.3355 Long EUR/USD at 1.3400 with a stop loss at 1.3375 and a profit limit of 1.3445 Once the news is released, if price spikes sharply in one direction, it will hit your profit target on one and get stopped out on the other. Let’s look at our example: The EUR/USD goes up to 1.3500 and our long hits the profit target at 1.3445 giving us a 45 pip gain. It also stops out our short order at 1.3375 for a 25 pip loss. At the end of the day, we had a net profit of 20 pips. Some platforms don’t allow hedging positions like this. If you are with a broker that doesn’t allow hedging, then follow the strategy below and then find another broker that allows hedging: OCO Order (One Cancels the Other) to Short EUR/USD at 1.3400 with a stop loss at 1.3425 and a profit limit of 1.3355 OCO Order (One Cancels the Other) to Short USD/CHF at 1.2145 with a stop loss at 1.2170 and a profit limit of 1.2100 First off, an OCO order will cancel the open order once one of the levels are hit. So, in this example if you hit your profit target on the EUR/USD, the stop loss order would be automatically canceled. Why did we include the USD/CHF? Because the EUR/USD and the USD/CHF are the closest in negative correlation. They are mirror opposites most times. So, if the news is good for the USD, the USD/CHF will go up and stop you out losing 25 pips. The EUR/USD will head lower and hopefully hit your profit target gaining 45 pips with a net of 20 pips. If hedging is not allowed on your platform, this is the best alternative.. (To be continued) In the next section, we will discuss the downsides of this strategy. DC Bonta has been amongst the most elite traders on the New York and American Stock Exchanges and has traded equities, options and Forex with firms such as Morgan Stanley and TD Waterhouse. His Forex trading strategies are available daily for Free on http://getresponse.com/t/9290810/577168/160336538/ Here’s To Your FX Trading Success, 
DC Bonta, The world’s #1 FX money manager 
| 
No comments:
Post a Comment