News Trading Strategy in Forex

Many would know that the important economic news may move Forex market up to 100pips and more in one go. During such a huge move there is an opportunity to make a good profit – fast and easy. But it might not be as simple as it seems, anything can happen during the news release. Here I’ll explain some strategies I use to trade News releases.

1. There are many different important news you can trade, but the main news I always try to catch are for EUR/USD – USD Change in Non-farm Payrolls (NFP), EUR European Central Bank Rate Decision (ECB), US Federal Reserve (FOMC).
You can find the release days in any Economic Calendar.

Example:

2. NFP and ECB – they released usually around afternoon:

– as usual I use a channel strategy: I look for a channel and draw it before 04 – 06 am GMT, place the orders buy/sell 20 pips up and 20 pips down from the top and the bottom of the channel, stop loss – 30 pips. Usually I do not place the Profit, sometimes I do but I always analyze the market and use Fibonacci levels to find the exit.

The best way is to watch the market during News release, if the market moves too fast your orders might not work in time, so you have to control and do it manually if necessary.

So, after news release if I’m in the trade and market moves in my favor I always try to close some positions and move stop loss to a safer position or place a trailing stop.

Also, if the market moves in the morning and take me in the trade before news and continue move in my favor I try to close some positions again and move stop loss; and if I can see another channel just before news release (like I explained below) I can place additional orders.

– If there is no channel in the morning I use 5 minutes chart and try to draw channel 15 – 10 minutes before News Release and place the orders as usual.

– If there is no channel at all, I place the orders from the current price just 5 minutes before News Release.

3. FOMC – evening news and I only look for the channel on 5 minutes chart and try to draw channel 15 – 10 minutes before News Release (if no channel I use current price ) and place the orders as usual.

Example 1: There was channel in the morning, market moved 40 pips up in our favor. You could choose the way to exit – first is safer – you could close few positions and the rest leave to continue move up to the level 138 or 161 (Fibo) changing the stop or more riskier – you could just wait and close all position at the level 138 or 161.

Example 2: There was a channel in the morning, market moved and took us in the trade (Line 1) before news release, so we could already close few positions, move the sop loss to a break even (Line 1) and before news release we could draw another channel and place additional orders. So we already have some profit and ready for a second wave (Line 2) even if the market would revers the first trade would of been safe.

So here, after News Release we could close again few positions from our second trade after market moved around 30 pips, move stop and leave the rest (plus the rest from first trade) moving down to level 138…

Example3: Evening new – 5 minutes chart, here is the channel before News Release and same strategy – entry 20 pips down and exit using Fibonacci levels.

4. Before trading News you need to analyze the situation and what the market is focusing on at the moment, depending on the current state of the economy, the importance of different news releases changes. One month same news release could be very important in the other month not at all. Also some press conferences could be very important. There are many Forex sites provide information on what is market usually focusing on during the week, I always use them.

Example: ECB rate decision (12:45 GMT) according to the experts was not going to change and the market was focusing on press conference at 13:30 instead.

5. Usually, if the market before News Release is very quiet the move after will be very strong.

Example: Three days market was very slow, no jumps, only 40 pips between the highest and the lowest price. The result – news release moved the market up to 200 pips.

6. Usually, if there are two important news one after another and if the first was big the second probably will be weak, so it’s better to avoid trading the second news or trade it carefully.

Example: First news release was around 100 pips, second was only 50 pips.

7. If the trend is very strong and News Release is expected to continue the trend I do not always place the second order.

8. Usually, main and big movement happens in first 5 minutes after News Release, if the market did not move, I would cancel all orders. If I have 2 orders I would cancel one if the other one is in good trade.

And if after News release one trade is loosing I would keep the other one and hope that the market reverse and with the next trade I would try to cover the loss and hopefully make some profit.

So, I usually trade News Releases for few minutes, but it is possible to stay in a trade for longer, the effect can lasts for few hours and days. The strategy would be the same, but you might need to look at 1H charts and change the size of the stop. You can also use it on other pairs, but anyway, always test it first.

In video my results of News trading – 300 pips, September – beginning of November 2014, it does not mean that you will get the same result, the market is changing and I don’t know what it will bring me in the next months of trading. Do not forget about all the risks of Forex trading especially on News Releases.