Hello Forum members! In this thread I am about to explain how I use fundamentals trading on the right way and how we can take benefits of news releases every week. Probably all know, about Forex calendar and news. That’s way, I am not want to explain that in details. My main target is here is to let people know how to trade in news time, what to look for and when exactly trade on.
To be honest, I am not the most successful news trader definitely. I have some mistakes on regular basis but I am learning this and sometimes I can actually get some lovely pips from news trading.
First rule for news trading I have noticed and come up with: Do not speculate on pre-news because; trust me there are so many investors who do that so, in case you are wrong on speculation. It is definitely hard to get out of that trade, in case there is surprise in that release to opposite decision.
2nd Rule: You should always look for release, do not trade it, if you do not get any surprise at all. As, if Manufacturing PMI for pound was expected at 47.8 and it came exactly at 47.8 then wait observing market reaction, but likely there will be not at all mostly. So, you might not want to be in that trade too. But, if you trade one release like I mentioned the same manufacturing PMI, you should definitely pay extra attention to previous releases over at least 1-2 weeks period for pound. Because, if there is down trend, bad release, then market is likely to penalize pound if there is even slight miss in that release. I am acquainted with many Forex traders might ask what to do if there are like 9-10 releases for EUR. How to know when we should trade? And when not.
So, first of all of course look at which is the more important among of them. Obviously, French unemployment data will be less important than whole Euro zone data. That’s way, do not wait for much of an action after 1st release. Wait for final numbers. Wait for the most important releases to come out. I have came up with losing trades only because, I jumped in trade after maker moved about 25-30 pips after release. But, later we got more important release at much better numbers and obviously market gave up that dip and went even future up. I ended up with losing trade.
I have a great way, how to trade news release that is, open M5 time frame on that pair you are looking to trade. Do not use more than 30 pips SL. If you do not get any surprise in release then do not open your trade that I said before. You should set your TP for 7-80 pips (maximum 100 pips).
One big aspect we have in Forex is all the meeting minutes, rate decisions, press conference. This is which is most complicated part in Forex. Sometime market can be very aggressive and volatile and extremely unpredictable too.
Dear Ricard Dorman! Thank you very much for your outstanding work!! Basically, I am a technical based Forex trader. So, I use trading indicators to realize technical causes of market. But honestly, I do not have any knowledge about news trading. But, you post really inspire me to know fundamental trading and use the advantages of news trading. Maybe I will learn something important from the discuss here. Actually, I have some confusion or want some suggestions on these:
1) Is there any way to handle a trade in which you previously entered and it’s stuck till the time. Where, there is some significant news release? I at such times have learned one should close such trades instantaneously, no matter even in loss or hold it with a very tight stop loss in order to avoid huge losses, Is there any other better option for me?
2) In addition, most of the time, there are some serious confusions over USD news release. I have observed that almost 40-50% of the times, when there is a USD news release of a kind which has fixed set of values. Even, if the news comes negative, then USD starts rising. I heard that it’s because of bond buying because of the negative news release which strengthens USD but still, which ones is such news, which most of the time do the opposite movement of market? Have you observed such releases in details?
3) And last one is how to handle speeches? Meeting minutes and testifying stuff. That’s the most preposterous part that I think. Because, you don’t know what he is saying and the market starts moving very quickly. Personally, I have tried to hear live speeches at times and really try to understand what the speaker was saying but even then, I never couldn’t find a clue of where he was trying to move the Forex market. Is there any way to get better the understanding of such speeches so that, we can trade in such release in a better way?
I’m really sorry dear Friend!! For posing too many questions but, this is one of the best opportunity for me to get clear direction that reduce the confusions of my news trading. In addition, I believe new traders also will be benefited from your suggestion. Hardly waiting for your replay….
Hello, your analysis is pretty good and also interesting. By the way, when I started to learn Forex trading the most confusing thing that bugs me, definitely that is Fundamental analysis. I am not still able to make good decision based on fundamental analysis. I am still focusing on technical analysis and this is way, I am losing most of my trades. Even, when my technical analysis is pretty good, then I see big news events are coming and unfortunately change the market trend. So, now it’s very essential for me to learn Fundamental trading. By the way, I am really thankful to you because of your clear massages about fundamental analysis.
Originally Posted by Zachary Davis
It is pleasure that you are really interested mate. Actually, news is complicated thing and clearly it can convert winning trades into losing more often that convert losing to winning. In addition, according to your questions now I am giving my answers:
1st answer: very often that trade you entered is from technical analysis of market. At least I had this problem sometimes. Technical analysis in news release time is not effective. So my suggestion is, if you have winning trade, for example 20 pips profit. You should set stop loss to break even in case news release is coming out worse than expected, you do not loss anything. On the other hand, if you are hanging into losing position or close to breakeven trade. it is wise to give up that trade before news release. Sometimes, Forex market is extremity silence before new release. Whatever, sometimes we already see some conjecture an hour before. This is way, traders start to price in release. Someone already knows, waits for release to come out that direction they are speculating. In this situation, if you are observing some minuses during that, just jump out as quickly as you can, especially on pound, it is just too predictable release, just take a look at price pre-news.
However, the full idea here is the less trade you have opens during news release, the more money you can save up. Because, very hardly ever we can guess where it might head and clearly this is very difficult, if forecast is higher from previous release, market is hoping it will come out that’s why although even the smallest miss might punish currency.
2nd answer: Actually, dollar is complicated definitely. Any Consumer confidence, ISM manufacturing numbers, Philly fed manufacturing index: these releases usually just 2 hours before European session closure. That means, very often better than expected is boosting risk sentiment because, what is going well in US, will come in Europe. Clearly dollar should strengthen if there is better than expected release, but that is very often risk movement. Market is happy that release is better than expected and sometimes, we see rally of 60-80 pips at the close of European session due to this release. When there are negative release to $, well that is opposite. It drags overall confidence for market and this is way, dollar starts rising. What we must remember here is that dollar is reserve currency and it strengthens only when fears start to rise and risk sentiment is damaged. Otherwise, even very surprisingly good release for dollar can really unwrap big rally for many risky assets like EUR, GBP and AUD. When bad release, just as opposite, market withdraws their hopes from many assets and buy dollar as safe heaven.
Last answer: thank you very for asking about speeches. Because, this is definitely the most difficult part in fundamental sector. First of all, I absolutely recommend following comments on Mt4 terminal news section during speeches. They appear there very quickly and main idea is explain. Very often we see some huge volatility during speech and nothing more, just volatility as a result, aggressive 50-80 pips up or down spikes. What I suggest is to look for any comment that is obvious, that can really influence currency movement not only that moment but later. For example, suppose Draghi says, we will do everything to prevent euro from collapse and clearly that is what can increase euro but not only that moment obviously in longer time. Later, we saw market doing up about more than500 pips……..
Next problem is, we got this month. If he says Euro is overvalued, what we do then? Sell? Exactly that, making many pips not only at that day. But later any rally is sold and nice pips collected. However, we do not get so obvious comment for every time. When market is volatile but we do not see any strong movement, just do not trade there. You should wait for speech to finish because, market is likely to wait for anything that could be worth trading. Many times though we do not get that, then we must just remain sidelines and later look for full report for that speech and then try to understand main ideas.
For pound, usually MPC meeting minutes or Kings speeches should be monitored closely for any rate cut or more easing, rate cut will mean pound won’t recover, but if we hear more talk for better easing, that should really boost pound in mid term and when else we should buy pound. For aussie, we just have to look at comments about aussie overvalued. If we do not get anything like that right now, aussie might strengthen afterwards, if we see that they are saying aussie is overvalued still. It should cause some trouble. Although we must also look for any comments about rate etc. if we get anything from that, well aussie might struggle. But, recently aussie has strengthened after any speech meeting minutes or rate decision.
So, according to your 1st rule; we shouldn’t trade before the news. But the problem is, market stop moving actively after 15-30 minutes, so no specialty after the news. What’s your opinion on NFP news? Have any particular system?
If we can do our trading with the help of news we can generate more profits
Originally Posted by Marcus Reilly