Trading the news

I wanted to try to trade the news by entering 2 limit orders a few pips above the current price (for the buy limit order) and a few pips below the current price (for the sell limit order). I tried that using virtual money and it worked. By the way, is this the way to play a news release?

Yesterday, I tried with real money and it went strange. First of all, the buy limit got hit even though I did not see the price going that high. It just got hit out of the blue! Strange! Was this done by my counter party (I am trading with a bank) to "sabotage" my trade? I have never seen anything like this.

Then soon after the news was released and the price went south. The sell limit got hit not at the limit price but some other less favourable price. Anyway, since my buy order got hit (and was not closed - I was still confused at what happened), the sell order came as a closing order for the buy order. Needless to say, I loss some money within a matter of seconds! Ouch!

Was my limit orders too near to the current price? I think it was 2-4 pips above the current price and the pair I was trading was the EURUSD (where the 2 pips was the normally the spread given by the bank).

You should not have used limit orders but Stop Limit orders instead and also had an OCO which means that if your Buy order is filled then your Sell order is cancelled.

A stop limit order means that you set 2 prices. The first is the price at which the order should become active (the Stop part) and when that price is hit the limit order becomes active at the second price. So as an example, the market may be trading at 1.9500 and you decide that if the news is positive then you want to be in the market if it goes up by 10 pips. So you set a Stop limit order with the stop at 1.9510 and a limit order at 1.9512. This means that when the price of 1.9510 is hit your limit order becomes active but only at a price of 1.9512 or better. The opposite may be the case for a Sell order. Also you would set things so that as soon as your Buy stop order is active any Sell Stop limit order is cancelled.

Now there is another issue when trading news and that is whipsaw. It is not unusual to have the market shoot up and down quite erratically on a news announcement and in your case activate both orders that you had. In my view it is better to determine the likely direction based on what the news is and enter manually on the initial retrace of price as long as the news release indicates a move in your expected direction. If is doesn't then don't take the trade.


Paul

Very true, on news release there will be more volume than usual so having a stop of only a few pips leaves you extremely vunerable. Gauge the direction then follow it through with a reasonable stop and be prepared for the market to gap suddenly, guaranteed stops can be put in place but will cost you more. A type of insurance should the market shoot past your stop.

CashOutChick said:

I wanted to try to trade the news by entering 2 limit orders a few pips above the current price (for the buy limit order) and a few pips below the current price (for the sell limit order). I tried that using virtual money and it worked. By the way, is this the way to play a news release?

Yesterday, I tried with real money and it went strange. First of all, the buy limit got hit even though I did not see the price going that high. It just got hit out of the blue! Strange! Was this done by my counter party (I am trading with a bank) to "sabotage" my trade? I have never seen anything like this.

Then soon after the news was released and the price went south. The sell limit got hit not at the limit price but some other less favourable price. Anyway, since my buy order got hit (and was not closed - I was still confused at what happened), the sell order came as a closing order for the buy order. Needless to say, I loss some money within a matter of seconds! Ouch!

Was my limit orders too near to the current price? I think it was 2-4 pips above the current price and the pair I was trading was the EURUSD (where the 2 pips was the normally the spread given by the bank).

Click to expand...

Ok. Basically what you attempted was bracket trading which is something i used to do when brokers were offering guaranteed fills. They dont do this anymore for one reason! Thay got spanked! . The method was use stop and contingent orders placed above and below the swing points (a stop order to get you filled and a contingent order which is a protective stop that is automatically set once the main order has been fired). This was great to play NFPR as it used gap and fly and would otherwise be almost untradable except for pennies after the event manually! The RR was silly ie 8pips at risk for big moves (back then 200-300pips). I did this until my broker spanked me back one day and guaranteed fills became a thing of the past! ...

My advice echoes Pauls, if you feel you must trade the news then better to wait for direction. Personally, I wouldnt bother!

You could use Finspreads - they always seem to execute my orders at the level I specify, even if the market gapped beyond the order level as it opened. They also offer an OCO order - One /Cancels Other - you can click this option and it allows you to enter two orders on the same market - whichever is triggered first cancels the other. Although you might wish the opposing order to remain valid as a stop-loss e.g. your buy at 1450 is triggered and you hope to achieve 2000 of course: but if the buy is triggered and the market falls to 1350 where you have a sell order, you might be glad to simply get out, and though this leaves you flat in cash, with no positions and no orders, you might appreciate the chance to re-evaluate.

Spread is not only one problem.
Broker don’t let you go in.
If you in you will have problem get out.

YouTube - Oanda spread on Non farm payroll 2/2/2007

oilfxpro

Hi

see more
YouTube - Broadcast Yourself.

CashOutChick said:

I wanted to try to trade the news by entering 2 limit orders a few pips above the current price (for the buy limit order) and a few pips below the current price (for the sell limit order). I tried that using virtual money and it worked. By the way, is this the way to play a news release?

Click to expand...

Trading the news is probably very attractive if one sees all the volatility going on. Wow, so many pips or so many points to be gained in so little time. I tried to do the same in my early days, sometimes it worked, other times it didn't. The times it didn't, price usually reversed straight after I exited

Anyway, what's often more important than the news itself, is the reaction to the initial reaction. I archived some charts about trading the news some time ago. Perhaps this is the time to dig some of those up (see attached images). Note how price, after the news, just carries on whatever it was doing.

If you can't stand the pain of blowing your account and losing all your money,u use an expert advisor to do it for you.It is less painfull

Trade The News Expert Advisor - Halcyon Forex

OILFXPRO

firewalker99 said:

Trading the news is probably very attractive if one sees all the volatility going on. Wow, so many pips or so many points to be gained in so little time. I tried to do the same in my early days, sometimes it worked, other times it didn't. The times it didn't, price usually reversed straight after I exited

Anyway, what's often more important than the news itself, is the reaction to the initial reaction. I archived some charts about trading the news some time ago. Perhaps this is the time to dig some of those up (see attached images). Note how price, after the news, just carries on whatever it was doing.

Click to expand...

Firewwalker

High probability traders keep out of the market during news.They enter the trend after the market has quietened down and thats how to make money.


What about the precceding trend?Look at your second chart

OILFXPRO

oilfxpro said:

What about the precceding trend?Look at your second chart
OILFXPRO

Click to expand...

Yes, like I said, the news usually has only a temporary effect and fading the initial reaction is often the best thing to do (if one insists on trading the news that is).

It seems illogical to me to stay away when big moves happen, news or not. Like any other aspect of trading, you have to know what you are doing and get prepared well, but it makes a lot of sense to trade the news. A lot of my income comes from trading the news. Notice how much easier it is to make money when there is good news flow. The forex markets move for a reason and biases move and out of fashion very quickly and it makes sense to take advantage of them.

You want to make sure that your broker is not going to be a problem when trading news. Oanda, for example makes no sense and SB companies like CS are really hopeless. Get a direct access broker, get prepared, know what you are doing and go for it. I never try to straddle so can't comment on that knowledgably but not trading the news makes no sense to me. I even hate the news because it is all a lot of BS but BS can make you money in these markets. The whole thing is one big BS anyway. Enjoy.

FXSCALPER2 said:

It seems illogical to me to stay away when big moves happen, news or not. Like any other aspect of trading, you have to know what you are doing and get prepared well, but it makes a lot of sense to trade the news. A lot of my income comes from trading the news. Notice how much easier it is to make money when there is good news flow. The forex markets move for a reason and biases move and out of fashion very quickly and it makes sense to take advantage of them.

You want to make sure that your broker is not going to be a problem when trading news. Oanda, for example makes no sense and SB companies like CS are really hopeless. Get a direct access broker, get prepared, know what you are doing and go for it. I never try to straddle so can't comment on that knowledgably but not trading the news makes no sense to me. I even hate the news because it is all a lot of BS but BS can make you money in these markets. The whole thing is one big BS anyway. Enjoy.

Click to expand...

I don't know what it is your saying exactly. I you're advocating staying in a trade when news is due, I tend to agree this can often yield to profit. However, entering a trade just minutes before the news on a mere "hunch", will cause - over time - a lot of financial pain...

CashOutChick said:

I wanted to try to trade the news by entering 2 limit orders a few pips above the current price (for the buy limit order) and a few pips below the current price (for the sell limit order). I tried that using virtual money and it worked. By the way, is this the way to play a news release?

Yesterday, I tried with real money and it went strange. First of all, the buy limit got hit even though I did not see the price going that high. It just got hit out of the blue! Strange! Was this done by my counter party (I am trading with a bank) to "sabotage" my trade? I have never seen anything like this.

Then soon after the news was released and the price went south. The sell limit got hit not at the limit price but some other less favourable price. Anyway, since my buy order got hit (and was not closed - I was still confused at what happened), the sell order came as a closing order for the buy order. Needless to say, I loss some money within a matter of seconds! Ouch!

Was my limit orders too near to the current price? I think it was 2-4 pips above the current price and the pair I was trading was the EURUSD (where the 2 pips was the normally the spread given by the bank).

Click to expand...

I would add that my two most meteoric gains came from trading shares on company results announcements on the morning of their announcement. Best to line up a likely candidate with good fundamentals and TA and general expectations of good results and statement, and note their results announcement date. As long as no quirky price action right before results day await results and if positive price reaction (NOT if positive results) go long. I see the window for this as 30-45 minutes after the open. The upward move established by then almost always continues the rest of the day and in 2/3 cases the next day too: Day 3 is more like 50:50. I have twice made 10% by midday on shares. Your stop can be the close of the day preceding results day. If a wide opening gap places the stop too far away, ether don't take the trade or use another nearer stop by % loss or (better) by TA. In any case, make stops tight. After I worked out this fun strategy I read that Alpesh Patel does this occasionally so a search for his writings might be useful for more detail.