A simple newbies forex theory - thoughts and comments please

[thesite]

Hi everyone,

This is my first post, but i've been following these boards for some time, and I am very interested in the forex market.

I've looked at, and analysed several strategies, some of which seem to have quite good success. But I've also been strangely drawn to this one of my own, which, I would just like to put out there and get some comments/ideas on, as I haven't really seen anyone talk about this before.

It's quite simple really, just focusing on the major high/medium impact news on the forex markets. And then once the news breaks, and the currency starts to move (down for a negative result, up for a positive) you buy or sell into the currency respectively. From my initial research and back testing, a large % of these types of set ups then continue to move in that direction over the next 20 minutes - 1 hour, making between 30-150 pips.

From research, these setups also require small stop losses, as obviously if the currency does start to go the other way, then the setup has not worked. So I would propose a stop loss of around 15-20 pips.

Just a note, i'm not currently trading this, and have only just started demo trading it.

So, comments and criticism please!

Thanks,

 

[Gumping]

Hi!

Nice to see you coming out of the shadows

There's nothing strange about being drawn to your own strategy - it does, after all, relfect your attitude, demeanour and trading style.

One thing about trading news is this: alot of forex brokers will either give re-quotes or widen spreads tremendously in the periods of high volatility directly preceding, and directly following news releases. Hence it can be difficult to trade with the wrong broker.

Basically, it seems forex brokers will either give guaranteed execution, or guaranteed spreads. The ones that guarantee execution will typically widen their spreads, whereas the guaranteed spreads people will simply requote you and you will end up with massive slippage.

However, this is just what I am told and having never traded news, I would not be able to tell you how much of a problem this is, or what brokers are the best ones to use.

But ultimately, your point about news releases is correct: you can get explosive movements in price at these times - much profit potential

 

[thesite]

Hi Gumping, thanks for your reply.

One thing about trading news is this: alot of forex brokers will either give re-quotes or widen spreads tremendously in the periods of high volatility directly preceding, and directly following news releases. Hence it can be difficult to trade with the wrong broker.

...

However, this is just what I am told and having never traded news, I would not be able to tell you how much of a problem this is, or what brokers are the best ones to use.

I've heard this as well, the broker I'm 'demoing' with at the moment though doesn't seem to bad...maybe this is because I'm 'demoing' though! Anyone have any good experiences of brokers that don't do this?

Cheers

 

[gooseman]

i'd say be a bit careful and keep up on market news as more often than not the outcome is generally priced into the market already.

 

[thesite]

Thanks GJ and Gooseman,

The main benefit you may find you derive is that you will have to go through the exercise of finding out what data releases etc move the market and understanding them a little bit.

I'm already finding this out, certain currencies/pairs react less to certain types of news etc - so your spot on there!

I'd say you risk being whipsawed a lot.

Hence the tight stops...but i shall see how I go.

Cheers