Forex intraday trading and trade policy around economic news releases

[JTrader]

Hello

I will be trading EUR/USD & perhaps GBP/USD. I have learnt that times when economic news items are released need to be handled with the upper most care. I intend to trade perhaps up to 10 times a day on a 5 minute timescale. I plan to stay out of the market for a period before and after the news item is released - say 40 minutes either side of the announcement.

Are these before and after periods long enough or too long or too short a period to sit on the sidelines and wait for market to digest the news and watch the reaction subside before looking for fresh trade entry opportunities?

How do other forex intraday traders handle economic news releases and the huge volatility that they can bring?

Thanks a lot

jtrader.

 

[Newtron Bomb]

jtrader
depending on the time frame of the strategy I am trading i will leave the announcements if I am scalping but for longer swing positions i do not actually pay any attention to them although I am cautious closer to announcements times.

NB

 

[Buk]

much has been debated about trading news on the crosses jtrader & I guess it comes down to personal preference/trade strats...if you have a platform which guarantee's your stop/limit orders & you're already positioned, then tweaking stops & perhaps banking some profits as a precaution wouldn't go amiss....the 'big' news flow (non-farms/fomc/greeny) usually have the most influence on how price reacts, and as you've witnessed, can whip all over the damned place until it settles.

Personally, I don't step up ahead of the big news events, and rarely trade post news, unless the whip isn't as savage, and a trend continuation or obvious reversal play develops....I've bracketed before, with mixed results.....so, just stay sidelined (unless positioned)....there are plenty of intraday opportunities for the remaining 20 odd day's without resorting to the lottery to pluck a few bonus pips!.....but I'm sure others will aggressively disagree

Friday's CPI (50 odd pip wiggle) was certainly tradeable post release, with 2 immediate pullback entries (8610 & 30) attainable, resulting in a trend continuation....but then, it's mainly the 'big' ones you're referring to I guess!

 

[JTrader]

Hi Buk and thanks

I'm not just referring to the MAJOR announcements, but all news releases in general really - because as of yet I have not had chance to monitor the effect of the different new releases, and identify the ones that I should pay closer attention to because of the size of their effect. In time I will be able to differentiate between major market movers and the smaller non-descript news releases, but in the meantime I am looking to adapt a general overall policy to news releases.
But thanks for the pointers (again!).

Cheers

jtrader.

 

[Baruch]

Hello

I will be trading EUR/USD & perhaps GBP/USD. I have learnt that times when economic news items are released need to be handled with the upper most care. I intend to trade perhaps up to 10 times a day on a 5 minute timescale. I plan to stay out of the market for a period before and after the news item is released - say 40 minutes either side of the announcement.

Are these before and after periods long enough or too long or too short a period to sit on the sidelines and wait for market to digest the news and watch the reaction subside before looking for fresh trade entry opportunities?

How do other forex intraday traders handle economic news releases and the huge volatility that they can bring?

Thanks a lot

jtrader.

It depends how important the news are. If it's Nonfarm Payrolls it can change the trend for weeks. Remenber it's the news (fundamentals) which makes the trend.

 

[c6ackp]

Hi jtrader - the problem is that the 13:30 & 09:30 announcements can be both the best and worst times to trade depending on your experience. The first several exposures to these times of huge volatility will be disastrous for most.

Depending on the current market context, I've found that the smaller announcements (i.e. other than non-farm & an unexpected rate decision) should be traded in the original direction. I call this strategy "OD4N" - Original Direction 4 News. The big players don't jump in and out on 1/5/60 minute bars or smaller announcements so it's in their interest for any trend to continue and this is what often happens - these events simply offer a chance to increase their positions at a decent price.

As Buk points out, it's better to focus on "mild time" trading opportunities, but I would definitely attempt to trade the big announcements perhaps by switching to a demo account - it's good practice and can be fun. Even when you do develop the 'feel' to take the rapid swings in price, you also need excellent execution to trade these times. Using Capital spreads, for example, would be pretty hopeless as you'll wait for > 10 seconds for the hourglass and "Waiting for trader to respond" messages to clear!

If you do trade the aftermath: it doesn't take may attempts to realise that chasing the moves will result in a series of losing trades, so don't even attempt this approach. Also, wait until at least 13:35/40 before considering making a trade. By around 13:50 you should be starting to focus on the 5/10 minute timeframe, otherwise you will end up being mesmerised by the 1min bars and you won't see the "wood for the trees".

HTH Steve

PS I didn't trade at all on Friday - I just looked at the chart for cable & found that the move downwards kicked off @ around 13:22 (rumours, etc?). However the pullback @ 13:40 looked like a safe entry point for 40 or so pips.