So, shouldn’t you trade during news releases at all? Of course not. There is a plan for every situation on the market. Today I will tell you what to do if you fail to trade on the news.
News Trading Styles
During a major news release, traders usually act in three different ways:
- Trading ahead of the news release. Here traders make an assumption about the outcome of the announcement and open trades in advance.
- Trading during news releases. It’s the most common style. Traders enter the market immediately after the announcement.
- Trading after the news release. These traders open their trades when the market already has a certain direction and you can open trades based on price actions. Today we’re gonna talk about this particular trading style.
So How You Do It?
When traders got used to making trading decisions solely on the basis of price actions then trading during news releases might seem too risky for them. Typically, these traders wait for the peak of volatility to end. Then they switch to a higher timeframe (4-hour, daily, or any other convenient for you), analyze the current market situation, and only then open a trade.
It happens that after the peak volatility decreases sharply. In this situation, traders using price actions have no choice but to retreat and do nothing. Please don’t take it as something negative. Yes, you did not manage to make money on this news, but you didn’t lose a dime, unlike thousands of other traders.
Main Benefit of This Method
What is the main cause of losses on Forex? It’s incorrect assumptions about future market behavior. When you trade exclusively on price actions, you don’t actually predict the future. Your trading decisions are based on previous and current market actions.
The simultaneous trading decisions of millions of traders have a huge impact on quotes. With this method, your trading decisions are already based on the actions of most traders. Thus, you’ll have much less unpleasant surprises to expect.
A Couple More Tips
Ultimately, you will definitely develop your own system. Maybe this method won’t work for you at all. But if you want to try focusing on price action trading, here are a couple of useful tips:
- Get ready for the news release in advance. Check the economic calendar on the weekend for the week ahead and every morning for the current day.
- Focus mostly on the news with high and medium impact. News with a lower impact is unlikely to affect the price at all. Some calendars can be sorted by the level of influence.
- Some news releases start having a strong impact on the market, even a couple of days before the actual new release. If you are afraid to trade during high volatility, you should avoid trading 24-48 hours before major events such as Non-Farm Payrolls or Fed Rate Decisions.
- The largest news releases usually come from the United States and mainly influence the major currency pairs (USD pairs). However, movements in the market after some news releases are so strong that they also have an impact on cross-currencies. Be careful.
Well, I think now you have everything you need to successfully survive the major news release and even make some profits on it. Remember one main rule: you should trade not on the news, but on the price action. Forget about data from the calendar. Better focus on the market itself. Then you will succeed.