Forex Strategy: Trading On The News.
For all the time of being of Forex it was feigned and written about thousands of various strategies. Their authors cried in one voice and argued that, finally, after a large amount of time they have found the truth on Forex. But as a result it was only just loud cheers, and nothing more. Devised strategies either did not work absolutely, or stopped working after prolonged use. It is clear. The Forex market is chaotic, changeable, and nothing permanent is alien to it. Efficient strategies will fail someday and they must be upgraded. But everything is not as amiss as it seems. Of all the thousands of Forex strategies there are ten all-purpose strategies that will exist even in hundreds of years. What are these strategies?
In this article we will speak about trading on the news. This is one of the most common Forex strategies. Its core is to make several transactions directly during the announcement of important economic news. I emphasize – important news, but not every ones. The strategy is based still on the forceful market movements, or other way it would simply not make sense. Important news – are the better part of news about the U.S. at 13:00 – 16:30 GMT. There may be more later news, about at 17:15 – 18:15 GMT. The news about changes of interest rates are the most interesting and popular, as they promise very big price movements.
If you want to trade successfully on the news, you have to follow these common rules:
1) Do not run the venture a big lot!
Money management must be always observed, but speculation on the news is even better. If you are trading with 1/10 part of your deposit, then it is reasonably to knock off the risk to 1/15 or higher. Well, if you are working with only 1% of the money, then you don’t have to change anything, you will not be able to change anything, since it is already minimum.
2) Do not open the position before announcement of the news!
Too early opening of position threatens with losses. Yes, thanks to some analysts, you know what you may expect from the news. It is not difficult to find out about projections. But you do not know whether they will come true or not, and you no one is able to give a guarantee to you. Therefore, opening your position before the news, you run the risk of flying blind. It will be well if you will manage to guess the direction. And if not? Unplanned losses? So before the announcement of news be master of yourself and do not hurry. Surely, you can object, they say, when it is time and the data is declared, it will be too late. That is true, but you mayprepare beforehand. How to do it? Read the next paragraph…
3) Arrange the orders properly!
To avoid any unnecessary errors described in the paragraph 2, do the following:
Prior to the announcement of the news, about 15 minutes prepare for it. Set two orders from the present price at once: one for opening a position to buy, the other – to sell. Thus, once you reckon for 2 variants of events. The most significant thing – is not to set orders too close to the present price. Prior to announcing the data on news, it will necessarily be small jerks in both parties. Therefore, if the orders for open positions will be just 20 points from the present prices, they are simply will be caught with market fluctuations. You do not want to open a position in the opposite direction? So you have to put orders to limit losses. You have to place them in two exemplars.
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