News Trading Can Make You A Fortune If Done Right!
News trading is risky. No doubt about it. Precisely because of this reason most of the trader prefer to close their trades before the news release time and stay out of the market. Markets usually become highly volatile at the time of the economic news releases like the NFP Report. But, there are some traders who relish news trading and have made a career out of trading economic news releases.
Trading news is for those traders who like a lot of action within a short period of time. News trading strategies are based on the fact that before any scheduled news release, market develops a certain expectation about the economic numbers that will be released. When the actual economic numbers are released and there is a wide deviation between the actual and the expected, there will be a knee jerk reaction in the market that will subside after some time.
There are basically three ways that you can trade the news. The first news trading strategy entail entering the market before the news is released. The second news trading strategy involves waiting the news release to hit the market and then enter into a trade and the third news trading strategy involves a combination of both. So, let's discuss one of these news trading strategy in detail now!
The first news trading strategy is for the pro active type of traders who want to take action before time and then wait for the news release to reap the results of their action. In the first news trading strategy, you enter the market before time let's say 20 minutes before the actual time of the news release. Doing this has certain advantages. At the time of the news release, brokers widen the spreads and make trade execution difficult. So by making an early entry, you are avoiding both these problems. You entered the market when the spreads were tight. You make your bet on the market direction by going long or short and placing a 30 pips stop.
Now, you are in the market watching it keenly in which direction it moves at the time of the news release. If the market moves in the wrong direction, you will be stopped out soon with a 30 pips loss. This was your total risk in trading the news. In case, the market moves in the right direction, you will close half of the position when it moves by 30 pips or by the amount you had risked. For the remaining half of the position, you will place a trailing stop with a 20 day Simple Moving Average (SMA). This is done to capitalize from the market move as much as possible.
You will be using the 5 minutes chart. You might be wondering why exit half of the position when the market moved in your favor. This was done to reduce risk and take profit as quickly as possible in order to avoid any whipsaw that might develop in the market. The most important thing about this news trading strategy is to predict the market direction at the time of the news release correctly.
Article Source: FxTradingStock.com
About the Author
Mr. Ahmad Hassam has done Masters from Harvard University. Get these 3 Swing Trading Systems FREE. Master these highly profitable Candlestick Patterns with this FREE 82 page PDF Candlestick Guide.
by: Ahmad Hassam
Total views: 24
Word Count: 526
Date: Thu, 28 Oct 2010
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