Each month there are plenty of news releases that affect the currency markets. Many of these announcements move the market significantly. But how do you approach trading those big moves?
A good strategy, if applied correctly, will quickly improve your bottom line at the end of the month. Let’s see a few tactics that will give you an idea of how you should go about trading news releases.
- The Hedger. This requires you to buy and sell the currency pair at the same time, before the news release. This way, by the time the number is out, you are already in the market, and all you have to do is close the losing position and stay with the winner.
- Ride the breakout. To capitalize on the breakout you will need to put in stop orders on both sides of the market before the news release. When either one is triggered, you will cancel out the other, and then try to ride out the move. A trailing stop might come in handy at this point.
- Post news retracement. Let the market move and complete its first wave after the news release. Once that is over, look for a Fibonacci retracement and enter the trade on that. Try to find some odds enhancers like horizontal support and resistance, pivot points or big figures to increase the probability of your trade.
Each of these strategies has its advantages and disadvantages, but one thing is certain: news moves the markets, and the Forex traders know it.
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