Your Preference On Trading & The News

[Doomberg]

Personally when day trading i like to stay out of the market around news times... I usually have alarms set to remind myself of the times of important releases, even if i'm not trading at these times i watch the markets... today was a classic example of what effect the news can have. Shortly before the news it broke out of its range upwards and then bang on 14:30 BoOOoOOoOM! Over 100 points drop which is a lot for the time in which it took place.

What i was going to ask, some people actually like to be in the markets at news time... I remember arabian nights saying that trading the news is one of the most profitable ways of trading, it would seem far too risky to implement in to my method of trading but i am aware that some do and curious to know what they do, just wait for a definitive breakout? And also what i wanted to ask... It seems that news releases usually effect the markets instantly, are the market makers already pre-aware of the news? and do they just press 'good' or 'bad' at the release time?

Anyway here is the example of a 120 point move from some news:

 

[bbmac]

all types of rumours swirl round ahead of known event risks/ major news releases and this can affect pre release volatility (or not.) Sometimes the rumours are confirmed by the actual data release (s) or not, sometimes it's a case of buy the rumour - sell the fact.

Market reaction is determined by how the market views the data and this is in the context of prevailing pre data sentiment. The reaction itself can be muted or violent and this is often determined by the actual no. (s) deviation from the previous reading and forecast. Markets don't like surprises so react accordingly. Sometimes there is a definate post data immediate knee-jerk reaction with a longer term follow thru or not, other times a more muted/mixed reaction where the market remains unmoved by the data or undecided by it.

There are classic immediate post data tactics, 'sell the 1st hi-buy the 1st pullback' and conversely 'buy the 1st lo-sell the 1st pullback' on a strong knee-jerk reaction...or as you mention the b/o.

Today's immediate post data knee-jerk nfp market reaction was a classic knee-jerk b/o reaction. the 5min chart below of gbpusd tells the story. A bad NFP number all round, market dumps $, so pairing heads up, 5min 1330pm candle closes as a master bullish thrust engulfing b/o (the last 28 candles on this t/f) - so significant, it breaks out of the recent swing hi on it's own and higher t/f's too...nice indication to get long at close of that candle at point a. Then price pullsback to the 23.6% of the x-y move and this is the classic 'sell the 1st hi-buy the 1st pullback' play...even if you don't sell the hi you can buy the pullback.

So there are some good hi-probabilitity opportunities to be had in immediate post data (+) markets particularly on the lower t/f's and the scare stories that i read time and again are misplaced if you have the right tactics and treat every release and subsequent market reaction on it's merits, remembering that it is not compulsary to enter the market at this or any time for that matter and that flat is also a position.

I must say though that tend not to hold a position into a data release unless stop is @ b/e or better but for me it is not something I tend to do anyway.

G/L

 

[bbmac]

On eurusd market has reversed nearly all of it's NFP reaction gains: analysis: sells $ on knee-jerk react to bad numbers then starts thinking about a slow down in U.s economy and risk apetite so buy them again ? Whatever the reason this is a good example that the knee-jerk and longer term reactions can sometimes differ. (relief rally in eurusd only ?)

G/L

 

[wackypete2]

I have no positions going into major news releases. Like bbmac I trade the reaction and let the price movement determine whether I will be long or short. All trades are very short term trying to pick up 10-20 pips at a time. It's really a type of psychology trading. It can be very lucrative trading knee-jerk reactions but I've had plenty of bad days too, comes with the territory.

Peter

 

[BeginnerJoe]

I have the news schedule. But I could never work out which one is major and important. What's the trick ? I am more interested to enter the market on major news for a quickie than to avoid such times.

 

[Black Swan]

On eurusd market has reversed nearly all of it's NFP reaction gains: analysis: sells $ on knee-jerk react to bad numbers then starts thinking about a slow down in U.s economy and risk apetite so buy them again ? Whatever the reason this is a good example that the knee-jerk and longer term reactions can sometimes differ. (relief rally in eurusd only ?)

G/L

The majority of NFP days price on the eur/usd stays in or reverts back to the trend...not sure of the statistical evidence, what the percentage is, but I reckon it must be close to 95%. My advice fwiw is if you're in a swing trade stay in it, viewed from the correct distance, higher timeframe, the news event seems like a blip....

 

[bbmac]

There are known event risks/news events that historically have been known to move the market more than others, think of Central bank announcements, Employment numbers, inflations numbers, GDP and other output measures etc... It is more to do with how far away from the forecast/previous month's data/data trend and any revisions to previous that determines the knee-jerk (+) market reaction...The simple answer is Go where the money goes if the market reaction is strong.

G/L

I have the news schedule. But I could never work out which one is major and important. What's the trick ? I am more interested to enter the market on major news for a quickie than to avoid such times.

 

[bbmac]

Absolutely, some cannot even be seen on the 1hr t/f after the event, let alone the Daily +, but as you know this does not mean to say that there are not opportunities on the lower t/f's.

Interesting observation re Eurusd.

G/L

.... viewed from the correct distance, higher timeframe, the news event seems like a blip....

 

[Black Swan]

Absolutely, some cannot even be seen on the 1hr t/f after the event, let alone the Daily +, but as you know this does not mean to say that there are not opportunities on the lower t/f's.

Interesting observation re Eurusd.

G/L

Hi mate with ref. The euro or perhaps any other us pair, might be worth actually running the numbers on it.

 

[Depth Trade]

Trade straight through, hold your positions as if there were no news. You're just as likely to be on the right side as being on the wrong side of the market.
If your going to be profitable in the market, you need to have a profitable bias in the direction of the trend.

...so either way news is irrelevant to some extent.

 

[bbmac]

Yours is probably good advice if you are trading on the longer t/f's for eg today on gbpusd the longer t/f players (4hr+) might have had their short stops above the recent daily swing hi @ 6139 (ie a 4th LH that followed a 4th LL in it's downtrend

so they are most likely still in their short positions.

But for daytraders on say the 1hr trigger or below, for anyone holding a short position ahead of the data, their stops were most likely to have been above point a b or c depending on which t/f 1hr or below provided the trigger and of course we know what happened next ?

G/L

Trade straight through, hold your positions as if there were no news. You're just as likely to be on the right side as being on the wrong side of the market.
If your going to be profitable in the market, you need to have a profitable bias in the direction of the trend.

...so either way news is irrelevant to some extent.