News trading is a style of trading where a trader makes his trading decisions based on economic news releases. The great advantage of trading the news is that you can be very successful in relatively short period of time. This style is perfect for those who can't dedicate themselves to the trading on full-time basis.
Economic news calendar can be found at investing.com and fxstreet.com. Impact column in the calendar shows how big volatility is expected upon the release of the news. Three other important columns are: Actual, Forecast and Previous. Previous shows the the indicator data for previous period. Forecast shows the expected indicator value; Actual is the news release.
So, what is causing big price movements? Well, it is a surprise. In this context the surprise is the difference between foretasted and actual value. We can see that actual value is sometimes shown in red, sometimes in green and sometimes in black. What does it mean? Green means that actual value is better than expected and it will cause bullish movement for the currency, on contrary red means that actual value is worse than expected and bearish movement is expected. Finally, black means that value is within expectation and currency should not move.
So, how to trade the news? Choose the pair that is consisted of currency for which the news will be released. Then, 30 to 45 seconds before the news release put one buy stop order 8 to 12 pips higher than actual price and one sell stop order 8 to 12 pips lower than actual price. When the news is released one stop order should become active (if the actual value is not in expectations). Then cancel the other stop order and close (or leave for few minutes or more) the active order. When you are satisfied with the gain close the order. If the news release did not cause the price movement cancel the both stop order and wait for other news release.
I advise you to try this strategy on demo account first, and then you can move to live account. If you sign-up to this blog by email, I will send you a script that is automatically placing stop orders.
Happy trading!
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