News Trading Forex

News Trading Methods

2007-08-17T22:15:00.000+07:00

Straddles

Straddles are really easy to set up and require very little thinking, but it is probably the riskiest method of trading the news. To set up a straddle, you basically put a limit order to go long a few pips above the market before a news report, and simultaneously put in a limit order to go short a few pips below the market. If the report creates enough volatility your orders will be automatically triggered, and your stops and profit levels will also be automatically executed if hit. Simple as that.

Again, it sounds easy, but be very cautious with this method in that both long and short orders can be triggered, and if profit targets and stops are set incorrectly, you can be stopped out for maximum loss on both orders. Also, you run the inherent risks of slippage.

"Trading the Numbers"

This seems to be a more preferred method by many, in that you determine whether or not the news report is worth trading at all – a lot less risky than straddles.

First, you must determine the significance of the news report being released. Not every news report release is tradable; either it wouldn’t cause a stir in the market, or that the initial volatility would be so crazy that it would be too dangerous to enter a trade.

Ask yourself what kind of environment the market has been in recently. In other words, what has been affecting the market lately?

For example, maybe the Federal Reserve has been concerned with inflation. In this scenario, any inflation-related data (consumer price index, hints on future monetary policy) would be closely watched by the Fed – and what the Fed is watching, traders are watching. Any news reports of this level may be great opportunities to trade, as long as you are conscious of the risks.

The second step is to watch the news release and see if the report or economic number being released is inline with what the market is expecting. Obviously, if the report or number was a good one and/or a good surprise for a country, then you would go long its currency, and vice versa.

For example, in the next U.S. employment report, the market was expecting 200K new jobs, and the number came out at 300K. It’s a surprise to the upside, and more jobs signal strength and growth in the U.S. You would go long as soon as the report is released and hope to catch a portion of the move. If the report came in pretty much as expected, then there would be no trade.

BabyPips.com

Trade at Your Own Risk!

2007-08-17T22:13:00.000+07:00

Before I pursue anything, I like to know exactly what I’m getting into. The same especially goes for trading. We’ve heard the benefits and why we should “trade the news,” but more importantly we should know the risks.

Slippage

Market volatility can increase geometrically during news releases, which means the price can move as little as 5 pips to 20 pips (or even 50 pips and more during major news releases) in the matter of seconds. If you try to get your order filled during this type of volatility, you will probably get filled at a much different price than you anticipated. This is especially risky with limit entry orders.

For example, I once placed an order with a broker (one that guaranteed fixed spreads, but not execution) 15 minutes before a major news release on EUR/USD. Right before the release, the market was at 1.2320. I set my limit order to go long at 1.2360, with a profit level of 1.2383. The news came out bad for the U.S. dollar, which caused the market to shoot up 80 pips as soon as it was released. My long order was triggered, but unfortunately, I got filled in at 1.2390 – 30 pips above my limit price!! After the market settled for a bit, my profit target price was executed at a loss because it was set below the price at which I got filled in. Fortunately, it was only a 7 pips loss, but it was a costly lesson learned.

Order Freeze

Some brokers prevent limit and market orders right before a major news release (some up to 30 minutes to an hour beforehand). This usually occurs with brokers who guarantee fixed spreads.The reason your trading platform “locks up” is not because the platform “crashed”, it’s because the spread is too wide and if the brokers offered them with their fixed spreads, they would lose money.

Volatility/ Whipsaws

During major news reports and economic releases the market can swing 20 to 50 pips in a second! News volatility can be very dangerous, even for experienced traders. You may catch the strong initial move, but like so many times in these situations, it can turn against you into a losing trade just as fast.

Spreads

Some brokers may guarantee execution but do not guarantee spreads, and during news events you’ll see spreads widen dramatically (I’ve seen a 3-pip spread turn into a 14-pip spread during a report). If you like to take small profits like 5 to 10 pips, this will hurt your chances of profitability and possibly keep you in a potentially losing trade.

Tradeable Reports

2007-08-17T22:00:00.000+07:00

With all of these countries to choose from, there are easily five to ten economic news releases almost every day! Also, the great thing about focusing on news releases is that they are scheduled in advance, so you know exactly when you can schedule your trading hours.

You may be thinking that five to ten news releases per day may be a lot to keep up with, but you really do not have to pay attention to every single report – you can pick and choose. There are a few key reports, most of which come out every month, that produce a significant amount of pip movement.

For this lesson, we will focus on U.S. news and economic reports, mostly because the U.S. dollar is involved in a majority of currency trades, and therefore tends to have the most significant impact on the currency markets. Here is a list of some of the top U.S. market moving reports:

- Employment Growth
- Interest Rate decisions
- Trade Balance
- Gross Domestic Product
- Retail Sales
- Durable Goods
- Inflation reports (Consumer Price Index and Producer Price Index)
- Foreign Purchases report (TIC Data)

Every country has a set of major reports similar to this list and can be as potentially volatile. Again, since these reports are scheduled in advance there are plenty of websites on the Internet with schedules and potential volatility rankings.

Things to Know When Trading News Reports

Now that we know “how” and “when” you can trade news reports, there are a few key concepts you should know before placing your first news trade.

While the actual news number or report is essential to the long-term movement of a currency pair, in the short-term the difference between the market expectations and the actual release is what causes potential breakout opportunities. This means economic numbers and reports that come out as the market expected generally do not cause a strong market reaction.

The quieter the market is before a news release, the more the market is poised for a significant move. Think about it: In a quiet market, less and less traders are buying and selling, possibly waiting for some sort of catalyst (like a news report maybe?). When this “catalyst” takes place, all of these traders waiting on the sidelines jump in at the same time causing a huge move in the market. So, the more traders wait (the quieter the market), the more will jump in after a news report (huge pips and a new Ferrari, right?).

Depending on the significance of the economic report, and the amount of deviation of the actual to the forecasted number, news breakout opportunities are generally short-lived and may last for only a few minutes or even a few seconds. Trading news releases may be better suited for scalpers and day traders.

source: BabyPips.com

Trading the News

2007-08-17T21:51:00.000+07:00

Trading the news is becoming a popular technique to trade the forex markets … and why shouldn’t it be? Time and time again you see currency pairs move 50 to 100 pips within minutes or even seconds after a major news release. When you see that, I bet you’re thinking, “50 to 100 pips!? That’s easy money!” Maybe it is, and maybe it isn’t. It all depends on how prepared you are to trade a news release.

The goal of this lesson isn’t to give you a specific “Trading the News” strategy. The goal is to point you in the right direction and show some of the risks involved with trading these events, because here at BabyPips.com, we want to help you help yourself in developing your own methods that fit YOU best.

Why Trade the News?

Trading news releases can be a significant tool in your trading arsenal. If you want, it can be your only weapon altogether. Economic news reports often spur strong short-term moves in the market, which are great trading opportunities for breakout traders. And with the forex being open 24 hours a day and a true worldwide market, there are plenty of opportunities almost every trading day to catch market volatility (aka a lot of pips!) kicked off by an economic news report.

Which Pairs Should I Trade?

Here is a list of the top currencies and countries in which you should focus on for news trading:
Symbol Country Currency Nickname
USD United States Dollar Buck
EUR European Union Euro Fiber
JPY Japan Yen Yen
GBP Great Britain Pound Cable
CHF Switzerland Franc Swissy
CAD Canada Dollar Loonie
AUD Australia Dollar Aussie
NZD New Zealand Dollar Kiwi

Now, there are plenty more currencies available to trade, but this list is based on the size of each country’s economy, frequency of news releases and the trading liquidity of their currency.

When are News Releases uh Released?

The list below displays the times when the most important economic data are released for each of the countries. Make sure you know them or go broke.
Symbol Country Time (GMT)
USD United States 13:30 - 15:00
EUR Germany 07:00 - 11:00
EUR France 07:45 - 09:00
EUR Italy 08:45 - 10:00
JPY Japan 23:50 - 04:30
GBP Great Britain 07:00 - 09:30
CHF Switzerland 06:45 - 10:30
CAD Canada 12:00 - 13:30
AUD Australia 22:30 - 00:30
NZD New Zealand 21:45 - 02:00

source: BabyPips.com

The Skinny on Forex

2007-08-17T21:45:00.000+07:00

What is FOREX?

The Foreign Exchange market, also referred to as the "FOREX" or "Forex" or "Retail forex" or “FX” or "Spot FX" or just "Spot" is the largest financial market in the world, with a volume of about $2 trillion a day. If you compare that to the $25 billion a day volume that the New York Stock Exchange trades, you can easily see how enormous the Foreign Exchange really is. It actually equates to more than three times the total amount of the stocks and futures markets combined! Forex rocks!

What is traded on the Foreign Exchange?

The simple answer is money. Forex trading is the simultaneous buying of one currency and the selling of another. Currencies are traded through a broker or dealer, and are traded in pairs; for example the Euro dollar and the US dollar (EUR/USD) or the British pound and the Japanese Yen (GBP/JPY).

Because you're not buying anything physical, this kind of trading can be confusing. Think of buying a currency as buying a share in a particular country. When you buy, say, Japanese Yen, you are in effect buying a share in the Japanese economy, as the price of the currency is a direct reflection of what the market thinks about the current and future health of the Japanese economy.

In general, the exchange rate of a currency versus other currencies is a reflection of the condition of that country's economy, compared to the other countries' economies.

Unlike other financial markets like the New York Stock Exchange, the Forex spot market has neither a physical location nor a central exchange. The Forex market is considered an Over-the-Counter (OTC) or 'Interbank' market, due to the fact that the entire market is run electronically, within a network of banks, continuously over a 24-hour period.

Until the late 1990’s, only the “big guys” could play this game. The initial requirement was that you could trade only if you had about ten to fifty million bucks to start with! Forex was originally intended to be used by bankers and large institutions - and not by us “little guys”. However, because of the rise of the Internet, online Forex trading firms are now able to offer trading accounts to 'retail' traders like us.

All you need to get started is a computer, a high-speed Internet connection, and the information contained within this site.

BabyPips.com

June 7, 2007 8:30am - AUD - Employment Change

2007-06-07T10:36:00.000+07:00

8:30am AUD Employment Change actual 39.4K forecast 11.3K previous 34.9K
8:30am AUD Unemployment Rate actual 4.2% forecast 4.4% previous 4.4%

Setelah membuka web forexfactory.com saya pun segera siap2 trading tadi pagi jam 7:30 mulai menghidupkan komputer dan konek ke internet. 15 menit sebelum pukul 8:30 AUDUSD ternyata sudah melaju naik sekitar 10point.
Saya pun memutuskan utk main BuyTrap saja, mengingat harga sudah menunjukkan trend naik begitu.
Keputusan pun dilakukan, pasang BuyTrap di 0.8452 TP di 0.8462 (10pips saja seperti biasa :P)
Pukul 8:30 pun tiba, price bergejolak naik 10pips pada menit pertama, dan retrace bbrp pips. Puncak tertinggi mencapai 17 pips dari titik di mana order saya pasang. (silakan liat chart!)

Analisa: AU Employment Change diramalkan turun hingga 11.3K, ternyata keluarnya angka 39.4K atau lebih baik dari pada perkiraan. Sehingga diperkirakan kondisi perekonomian AU tidak sejelek yang diramalkan dengan adanya penurunan tingkat Employment.
Demikian pula data Unemployment Rate (pengangguran) yang lebih rendah dari perkiraan semakin menambah keyakinan bahwa perekonomian AU akan membaik.

Chart AUDUSD 1minutes, nice up-move 17pips

June 6, 2007 7:30pm - EUR - ECB President Trichet Speaks

2007-06-07T09:38:00.000+07:00

7:30pm EUR ECB President Trichet Speaks

Pidato bos ECB ini mengomentari tingkat kenaikan suku bunga ECB yang beritanya telah dilaunching sebelumnya.
Para trader sebagaimana diberitakan oleh FxStreet akan menunggu pernyataan pers dari sang Presiden untuk dapat melakukan aksi trading nya. (sok pinter gw :P)
Hasil pergerakan price di EURUSD dapat dilihat pada gambar di bawah. Rupanya terjadi "Whipsaw" dimana harga bergejolak naik tapi kemudian turun kembali. Hal ini sangat membahayakan. Untuk menghindari ini, biasanya saya menggunakan indikator SuperSR7, dimana saya memasang TrapOrder di luar garis SuperSR7.
Namun karena terlalu bernafsu, tadi malam saya mengalami Loss karena memasang buyTrap di bawah SuperSR7.:(
Untungnya saya juga pasang SellTrap di bawah SR7 (@1.3505 TP 1.3495)
sehingga kekalahan pun terbayar kembali :)

Chart EURUSD 5minutes, showing a whipsaw dangerous price action.

June 5, 2007 7:15pm - ALL - Central Bankers Speak

2007-06-06T12:31:00.000+07:00

Pertemuan para bos2 besar bank negara US UK dan JP diharapkan dapat membuat pasar forex berfluktuasi. Dan ternyata harapan ini benar, fluktuasi besar terjadi di pair USD/JPY (>30pips) dan di EUR/USD (>25pips), sedangkan di GBP/USD hanya 15 pips.
Saya secara pribadi trading di pair GU :( ya nggak apa2 lah, yang penting profit +10pips :P

Mari kita lihat rekaman chart MT4 dibawah:

EUR/USD 5minutes chart, moving UP >25pips. (Click to enlarge!)

USD/JPY 5M, moving DOWN >30pips.(Click to enlarge!)

GBP/USD 5M, moving UP only 16pips.(Click to enlarge!)

Welcome

2007-06-06T10:35:00.000+07:00

Selamat datang,
Di Blog ini saya akan mencoba memposting aktifitas trading Forex yg saya lakukan.
Trading syle saya adalah News-Trading, yang mana saya akan melakukan trading setiap kali ada Fundamental Announcement yg sekiranya akan membuat bergejolaknya price-rates.
Posting dlm blog ini adalah riil berdasarkan chart dari software MetaTrader v4.

Semoga blog ini bermanfaat bagi anda yang membutuhkan
Demikian kata pengantar dari saya, terima kasih.