Trading on the news

[raa]

I woke for AUD trade on monetary statement, it was due out, took about a minute and a half for the market to digest it and it started to climb. The ascent was so slow (but steady), I was waiting for a confirmation of the move, then we had some resistance and move appeared to lose momentum. I did not trade. In a hindsight it was a right thing to do. The statement itself was neutral pretty much as would be expected, nothing bold. Won't bother to wake up for this one again.

Today we have a flagship NFP. I will trade it on EURUSD, looking for both fading the moves and playing continuations. Swings are usually wild and momentum stays longer than for any other trade (including amazingly even IR change) especially on EURUSD. I look to bag some 15 pips hopefully more. In February I bagged 45 pips.

[raa]

Well NFP came and went. I have two screens open: EURUSD and USDJPY. The reaction on EU was right out of the gates messy, spread went high but moves were small, in the end I did not trade EU. I made one trade on UJ, it triggered 2 lots, but closed manually as by the time I entered it seemed to be losing momentum. Needless to say it didn't and went on after I closed ;(

Result 3.5 + 1.1 pips on UJ, commission is somewhat 0.4 pip, so net gain is +3.8.

This is very silly, but so was this NFP report. The reaction on EU was so weak MDP hasn't fire a single trade! It came 115K instead of expected 160k (but I heard reports about revised expectations to 120k then it makes sense) so there were less jobs created than expected but the unemployment rate went down to 8.1 from 8.2 that was expected not to change. It created a conflict and a resulting mess. PIMCO says rate went down as people stop applying for a job giving up finding one, not because there are more jobs.

Well, looks like the rest of the month will be tough, as the first week is the one to profit. I can see some possible pips on AU Empl. report, UK MPC statement and next weeks Friday's CAD Employment report. AU CPI comes on Sunday night, I won't even bother to wake up, liquidity will be scarce, slippage and spreads high. CHF CPI will be on Monday morning, I will give it a try, but hardly much can happen in a current situation of a rate dreadlock in Switzerland. Maybe some AU retail sales as well. I don't expect much from UK reports besides MPC, but if data is really good for a change, maybe there will be a perception of removing the stimulus, so UK news might get back in focus. Also we have a quarterly Inflation Report from UK a week after the next, not sure if it move anything given the circumstance but the one to attend for sure. Same week also FOMC minutes, could move something, could be just dead as well. Tricky one to trade.

Other reports are of little use: US RetSales and CPI come together but by adding two zeroes we still have a zero, so unlikely any big move, will check it out though. CAD CPI usually market doesn't bother with a reaction to it, very small a weak, good for losing pips. UK Labor data doesn't bother anyone anymore. Small reaction with whipsaws. I omit all NZD reports as well for illiquidity reason.

Maybe possible to expect some smaller move out of German ZEW but only on a big enough deviation.

At the moment results are miserable: +1.3 pips for the month

[raa]

Well embarassed to report but I managed to screw up the day. Traded CAD Ivey PMI, closed the first trade at almost break even while it went well in profit, got desperate to get some and ended up with two more trades, both losers.

#1 +0.2
#2 -2.7
#3 -3.1

We have got some slippage on opening and closing orders as you can see.

Add 3x0.5 commissions and we have -5.1 pip, or total for the month -3.8

Not a disaster but a bad start. However I have realised my biggest flow in trading and the reason I trade so poorly now in comparison to Jan, Feb:
1. After I got hit by losses with EAs in March and April I became a scary chicken who hesitates to trade right when the opportunity arises and loses a moment
2. As I am now afraid of losses I started to close down my winners very fast depriving myself of pips and possibility to pay for the inevitable losers and have something left

Basically this is the reason. This is how I am going to overcome it:
1. I removed a code that closes open orders from my "kill all" script, that used to delete unopened orders and close opened.
2. Orders must only be closed by TS be it initial acting as stop loss or in profit, period
3. If trade moves well in profit, I will use Visual Trading console to adjust trailing stop manually as my EA now is configured to stop close trailing stop after the first trade is 5 pips in profit and second is 3 pips in profit, in order to protect the initial orders but allow to capture bigger moves that would be stopped out with 2 pips trail stop than I have
4. Trade right away as spread reduces, don't waste and opportunity, confirmation leads to poorer trade in this case, the erliest trades have the greatest opportunity to produce massive pips, later you trade, less momentum is there less you can win and more chances of a price stall and a loser
5. Stop after 1 loser, period. It means most releases will result in 1 trade only. I allow myself to do more trades only if the first one is in profit and I want to pyramid into the profit, or if the first one is closed well in profit, market made a big swing but momentum is still intact and there is an opportunity again, it means the worst case I have something like -3 pips for the release. This includes NFP. The first trade must be a winner on NFP as well and pay for a possible next trade. By not closing out early I can capture more pips with just one trade set, that with a bunch of trades I do and crazy commissions I pay that my broker loves so much! Sorry bro, lean time!

This is my action plan I start to implement starting next week with a first possible trade CHF CPI on Monday!!!

[RVincent]

You guys are amazing to trade from the news!

[pharoh777]

Raa, first off, AWESOME info. News trading has always made me a little gunshy. I used to have a buy/sell stop + trailing/stop breakout news system I developed a bit, but after seeing how bad slippage can destroy results, I gave it up. I was cracking up a bit about the "labor data doesn't bother anyone anymore". NO KIDDING!! I have been shocked at how news has been received by markets. I think they are just numb at this point to news and don't care about anything. It's almost like the market is depressed, and too tired to move much although it's erratic in the way it does move. It's erratic in slow motion. Weird.


Thanks for always giving us an inside view of what's really going on in the market. I have learned much from you!

[raa]

Hi Omar, thanks for your kind words. Trading overall has been very tough lately and news trading is not an exception, however spike trading guys made some amazing returns last month as we got a lot of great news spikes riding to riches. Too bad I missed all of them. Last Friday Cad EC gave some amazing 50 pips spike but retraced without any continuation. Now I am thinking of going both ways same time - for continuation and reversal. Historically most news spike reverse either completely or partially and only smaller portion goes into continuation nicely. For after-spike trading reversal is just as good as continuation, we shouldn't care about the direction, only about the speed, momentum and spread.

So this is what I am thinking now:
1. Modify my script to place a small straddle upon execution, to capture either continuation or reversal, placing stop entry orders above and below the price
2. Wait for the initial spike and spread returning to normalcy and price hesitating to move further, then place a straddle
3. Hopefully the move will be deep enough to run immediately into break even and protect us from losses and then a free ride to profits

Not sure if 2 pips away suffice for this strategy, maybe 3-4 pips away will be required to prevent from whipsaws.
The standard strategy explained earlier is still valid, this new experimental after-spike straddle shall be used only after the initial big spike where price is likely to move further or reverse, in any case with still valid momentum.

[raa]

YEEEEEEESSSS!!!!!!
FINALLY a BREAKTHROUGH!

I waited so long for a nice trade and it came in Inflation Report. Huge reaction, very nice price action allowed me to entry twice and profited higely. Captured 55 pips!!! from both positions, or 27 pips from a combined position, i.e. already exceeded my monthly target. Almost covered my previous losses from robots.

[raa]

I have to say my new tactics allowed me to reap much larger pip gain, by stop trailing after 5 pips in profit. So the price run away without 2 pips away trail stop messing around. I closed the trade manually with VTC trade manager. Actually I should have waited more, and captured perhaps 20 pips more for each position, but lesson learned. This method works well and trades like this, while relatively rare, are the prime targets. Taking 5-7 pips is good, but those monsters are the ones that we should be after. Risking just 3 pips including commissions to gain 55, is good in any book.

[raa]

Two trades today on CAD CPI. It came positive to Canada and better than expectation, albeit by only 0.2%, while the trigger was 0.3. However the late up trend was contradicting with the down move and the initial push down quickly reversed. I still bet on moving down again with my 2-order entry. First order triggered, went maybe 1 pip in profit but reversed and stopped out for a very small loss. I left the second untriggered order to stay. Price hung for a couple of minutes then moved down again, triggering my second order. It went into profit, I closed manually as it hit double bottom and was going against the trend on not the very strong data. So the net result is +2 pips, but less commissions we have 1 pip gain for the day. Better any gain than any pain!

[raa]

Didn't have any trades for a while, traded AUD Ret sales last night, a great initial move but then momentum wasn't very clear. I opted to give a try, trade 1 triggered but immediately after hesitated and stopped out for -2.6 pips. No need to say immediately after it reversed and continued for 10 healthy pips. I cancelled the second entry. All played by the rules, so no need to feel bad. Would do it again.

One thing I might need to evaluate if trading AUD news with this method makes any sense, while AUD news are one of the best, as far as I remember all stuff happens in the first push and then love is lost. It either fires away, stops and starts to move without momentum, of fires, retraces fiersly and then loses momentum. Basically little opportunities for me even for fading as for AUD news in the night spread widens for a longer time and trading on the initial spike one way or another is a no-go, at least with stops like I have.

Total: -2.6 pips and -0.5 pips for commission, i.e. -3.1 pips.

Tomorrow we will only have ADP Employment as one possibility, although it produces a tradeable move 1-2 times per year, so most likely no cigar.