Weekly Focus/News Trading Strategy

(Photo Credit: https://i.ytimg.com/vi/w-NE8DVRk3E/maxresdefault.jpg)

This week is going to be one that will yield great volatility in the FX markets.

We have our monthly famous NFP, AUD interest rate and ECB meeting/bid rate on the calendar.

(All in Singapore Time, GMT+8)nfp

I personally love such events as with great volatility comes great trading opportunities.

Very often you hear of advice being thrown around, such as:

Don’t trade when there is high impact news as you can get stopped out when price whipsaws.

And next thing you know, you’re seeing things like:

Captured XXX pips from XXX/XXX

Ironic, you may think to yourself.

How these traders profit from such large moves by major news events is actually pretty simple:

  • Have a bias of where price is likely to push into
  • Time your trade such that the stop loss is reasonably distanced from entry price and provides a good risk to reward
  • If price doesn’t move in your favor much within few hours from time of major news release, close out the position at breakeven or at a small loss.
  • If price moves starts to move in your favor progressively, time to start shifting your stop to breakeven
  • Wait for news release

The idea is to position yourself well before the news actually occurs, with the exception of black swan events which no one can predict.

Now there will be two outcomes to this:

If news is favorable to your FX pair, enjoy rolling your profits – you’ve successfully achieved your objective.
If news is unfavorable to your FX pair, it would be best to close out immediately to protect your profits instead of waiting for it to hit your stop-loss at breakeven.

Either way, you win.

Manage your risks accordingly and trade safe!

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