- How To Stay Out Of Bad Trades
- 5 Trading Resolutions to Make in 2017
- How time consuming is Forex trading?
- Trade Like A Business
- Trading the Market Zones for a Profit
- Your Guide to Letting Your Profits Run
- Key Points to Accelerate Your Learning Process
- Discipline - Why You Don’t Have It. And How to Get It
- Transitioning from a Demo to a Fully-fledged Trading Account
- Why Traders Overtrade
- Learn to Trade the News Putting the Odds in Your Favour
- Setting Profit Goals: in Pips or Percentage Gain per Day?
- How to Let Profits Run?
- Get Prepared to Beat Your Previous Trading Achievements
- How to Trade the News Effectively
- Create a Trading Battle Plan
- Solution Focused Trading
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Learn to Trade the News Putting the Odds in Your Favour
The prospect of making fast, easy money from trading news releases has, and always will, draw rookie the trader to the market like a moth to light bulb. The stomach-churning reality is, however, that many will promptly blow a hole in their trading account, only to give up and never trade again.
But for a growing army of the set-and-forget traders who pursue opportunities with high reward potential on the higher timeframes (daily and weekly), news trading is the very reason why they can and are casually winning big in financial markets.
The irony is, though, they are not psychic, nor do they have supernatural powers. In fact, far from it! The difference between the set-and-forget trader who routinely ignores the news and loss-making gambler is astonishingly small.
Set-and-forget traders who trade the daily and weekly charts are traders who do not directly trade news. Instead, they will typically have a valid trade set-up already in play and will view news and the market’s response to it as nothing more than a catalyst in driving a faster outcome for their trade.
So here’s the question: If there is a 50/50 change of the news release agreeing with the direction of your trade or causing the market to turn against you – how can you manipulate things so that if the market turns your way – you win big... yet, if the news goes against you, you only lose small?
The answer lies with risk management. By keeping the risk small (minimum of 1-2%) and using a protective “stop loss” which automatically exits you from the trade if the market goes against you, you will have already secured yourself a powerful edge. From just using this simple technique, you will ensure that you only lose small if the news proves you wrong.
But what if the news does agree with the direction of your trade? Remember, news can do one of three things; it can agree or disagree with your trade’s direction, or have no impact whatsoever.
Playing the odds in your favour
By risking a small amount per trade and selecting only trades with a positive reward, if news goes against the trader, the worst possible thing that can happen is that they lose 1% of their account’s value but if news happens to be in their favour, the best possible thing that can happen is that they could potentially have a faster positive outcome by hitting their target and securing 3% gain on their trading account.
This logic is similar to betting on the outcome of a flip of a coin; heads or tails but safe in the knowledge that if you get it right, you would win seriously more if you were right than you would stand to lose from getting it wrong.
This is the very logic which will help the set-and-forget trade use news to their advantage. Rather than trying to second guess what the news will be, they will subscribe to the probabilities, safe in the knowledge that if they are ‘right’ they are rewarded infinitely more than if they are ‘wrong’.
It shouldn’t happen to a professional
Imagine this; just minutes away is the most widely anticipated economic number of the month, nonfarm payrolls, and you have decided to take an intra-day punt just before the news release on nothing more in the hope of grabbing your slice of the action. Except, you got triggered into the market, paid a huge spread and got stopped – or rather – slipped out of the trade within seconds thanks to a spike...only, to your horror, seeing the trade go in your direction minutes later, but without you.