Is Forex News Trading SEXY?
Yes, it is! Don’t get me wrong. I am really totally serous about this. I’ve been trading currencies since the first cars were invented (and I am still in shape) I know what I’m talking about. Let me show you how I trade Forex news.
5 minutes before the news release I prepare some nice cup of coffee and make sure everything is on its place.
3 minutes before the news release, I do some final checks on the Forex news calendar, noting the previous numbers, the forecast and my trigger numbers.
1 minute before the news release i put my fingers on the hot buttons on my keyboard (buy/sell), close my eyes and repeat the trigger numbers for buy and sell in my mind. Feel the tension?
The second the actual numbers come through the squawk box, I hit the buy or sell button and enjoy the ride.
The usual profit is 70 to 100 pips per trade but sometimes news trades are good for 150-250 Pips.
Now before you go rushing off to your PC to start trading the news, please hold on for a minute.
Not everything about Forex News trading is “milk and honey”
If Forex trading was that sexy, then everyone would be rich and smiling to the bank every day. The truth is that there are inherent dangers that lurk at every corner before, during and after news trades.
Here are some of them:
- You may experience a very nasty phenomenon known as “slippage”. Slippage occurs when you try to place a market or instant order, but your order gets filled at a price far removed from the original quote, and sending your account many pips negative. Slippage can easily turn a trade that should have been a winner into a very nightmarish loss.
How to deal with it: The Metatrader4 platform allows you to use the standard deviation feature to control your entry prices. If you want to trade a high volatility news item, you should enable the feature and set up a standard deviation from five pips.
- Some scam brokers are not satisfied with just making money from your trading spreads, but actually play dirty and freeze their trading platforms. It can be downright annoying to analyze the numbers, and just as you want to pull the trigger, the platform freezes and only opens up after the trade opportunity is effectively over.
How to deal with it: Make sure you trade FX news only with a trusted broker what supports STP (straight through processing) or DMA (direct market access). If your broker has access to ECN pricing, try to subscribe for this service. It may cost money, but it helps you make a lot more in the long run. Want to know as much as possible about brokers? Read article - 5 types of Forex Forex Brokers you need to know about.
- Everybody is already “IN” the trade while you are still waiting for the actual numbers. This is usually the case with most news items, as only the institutional traders can afford the costly fees from Bloomberg and Reuters news services that deliver the news about five minutes before the retail traders get it.
As news trading is based on the actual numbers, it is essential to have them quick enough to make the trade.
By the way, have you ever heard about News trading strategies? If no, read article about Forex news trading strategies that matter.
Optional you can use Fx Pulse. It is a plug in for the Metatrader platform which provides you with real time news, forecast numbers and displays them directly on your trading chart. I developed it, mainly for myself, but decided to share it with other foreign exchange traders as a contribution to the trading community. It’s only a little slower than Bloomberg and Reuters news but much faster than any other free news service, and the best is that it is completely free. You can download it here – It is free!
P.S.: In my next blog post, I will share with you more information about which Forex news reports are trade worthy. Make sure you don’t miss it by subscribing to my blog.