News trading often brings the biggest moves of the month. Focus instead on those things you want least to happen and on what your response will be. Have you ever wondered why markets move so much before a news release?
This causes a relatively large move immediately following a news release. Now, t rading the news is exciting. Now that you know what news events to focus on, you should know that all news releases are not treated equal and you should know the differences. On the other hand , if news releases and the numbers are way out side of expectations, then you will see a massive move in which you should be prepared to trade if this style of trading fits your risk profile.
If markets come out in line with expectations then you will approach the set up completely differently than if the release is completely outside of expectations. Release In Line With Expectations: More than likely, you will see a reaction to the news event even if the numbers come in line. This can be because a flow of orders comes in the moves around prices but regardless of the reason this is your opportunity to have the market prove to you a level of support or resistance.
If price touches that important level and holds, you can enter in a way so that your risk is still tight as the market continues business as usual. There are two simple and objective tools you can use to find support or resistance so you can identify a high probability entry off a news event. The first would be Pivot Prices which are objective points of support and resistance based on prior price action. The other tool would be a trendlines which is a manually drawn line connecting price points where the trend continue.
Release Outside of Expectations: If a trendline is truly broken, retested and then continues in the direction of the break, you have a clear trade with tight risk. Naturally, a trend line break would most likely happen only on high volatility caused by news coming outside of expectations. When an entry is triggered of such a move, you can place a tight stop below the trendline to prevent you from holding a counter trade if the trend resumes. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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