The first thing we need to consider is what kind of news we need to trade. Earlier in this series of courses, we discussed news reports that caused the most volatility in the market. Ideally, you may only want to trade these news, because, after the announcement of these news reports, it is likely to cause huge market volatility.
What you need to do next is to observe the trading range of the exchange rate at least 20 minutes before the actual news is announced. The high point of this range is likely to be the upward break point of the exchange rate, and the low point of the range may be the downward break point. It is worth noting that the narrower the range of exchange rate fluctuations, the greater the volatility that may be triggered after the news report is released.
The breakthrough point will be your entry point. This level is the price level at which you intend to set the order. Your stop loss should be set at approximately 20 points above or below the breakout point, and your initial profit target should be the same as the range formed by the breakout point. This is what we call intertemporal trading-no matter which direction the price fluctuates, you have the opportunity to trade.
Given that you are ready to enter in either direction, all you need to do is wait for the news to be announced. Sometimes, the exchange rate may initially move in a certain direction, but then you find that you have been hit to stop loss, because the exchange rate then quickly moved in the opposite direction. However, another entry order that you have set up may trigger, and if you win in this order, you should be able to make up for your initial loss, and you will eventually get a small profit.
The best case is that the exchange rate only triggers an order you set, and the price continues to fluctuate in a direction that is beneficial to you. In this case, you will not experience any losses. No matter which direction the exchange rate fluctuates in, if you operate it properly, you are likely to make a profit.
One reason non-directional trading is so appealing is that it eliminates the effects of market sentiment-when volatility begins, all you want is profit. This allows you to take advantage of more trading opportunities to achieve profitability, because the orders you set may be triggered in either direction.
Of course, there are more news trading strategies, but, no matter when you want to conduct news trading, the concepts we talked about in this lesson will help you.
Summary: News Trading
Now, you already know how to trade news! When trading, please keep the following points in mind:
• When you are conducting a directional transaction, you will expect the exchange rate to fluctuate in a certain direction, and you have already placed orders under this expectation;
• When the news is announced, it is always good to know why the market is moving in a certain direction;
• When you are conducting non-directional transactions, you do not need to care about which direction the exchange rate will fluctuate in. You only need to wait until the exchange rate triggers the order you have set in advance;
• Non-directional transactions are also called intertemporal transactions.
It’s simple, isn’t it?
Before you can feel which news reports will cause market volatility, how much data differs from expectations can cause market volatility, and which reports are to avoid trading, you need to practice and deal with some reports.
Like other trading methods, your success is based on good preparation.
It takes time and practice. You need to do enough homework and study economic indicators to understand why these indicators are important.
Remember a word, cherries are delicious and trees are hard to plant. So, once you have mastered the idea of news trading and can use it with ease, you will find that news trading will bring you huge benefits.