News trading is a style of
trading where a trader makes his trading decisions based on economic
news releases. The great advantage of trading the news is that you
can be very successful in a relatively short period of time. This style
is perfect for those who can't dedicate themselves to trading on a full-time basis.
An economic news calendar can
be found at investing.com and fxstreet.com. The impact column in the calendar
shows how big volatility is expected upon the release of the news.
Three other important columns are Actual, Forecast and Previous.
Previous shows the indicator data for the previous period. Forecast
shows the expected indicator value; Actual is the news release.
So, what is causing big
price movements? Well, it is a surprise. In this context, the surprise
is the difference between forecasted and actual value. We can see
that actual value is sometimes shown in red, sometimes in green and
sometimes in black. What does it mean? Green means that actual value
is better than expected and it will cause bullish movement for the
currency, on the contrary, red means that actual value is worse than
expected and bearish movement is expected. Finally, black means that
value is within expectation and currency should not move.
So, how to trade the news?
Choose the pair that is consisted of currency for which the news will
be released. Then, 30 to 45 seconds before the news release put one
buy stop order 8 to 12 pips higher than the actual price and one sell
stop order 8 to 12 pips lower than the actual price. When the news is
released one-stop order should become active (if the actual value is
not in expectations). Then cancel the other stop order and close (or
leave for a few minutes or more) the active order. When you are
satisfied with the gain to close the order. If the news release did not
cause the price movement to cancel both stop order and wait for another news release.
I advise you to try this
strategy on a demo account first, and then you can move to a live
account. If you sign-up to this blog by email, I will send you a
script that is automatically placing stop orders.
Happy trading!
