I often get a lot of questions about my thoughts on the news in forex. I am aware that there are many Fundamental Traders. There are also other traders who rely heavily on news releases from http://www.forexfactory.com and other websites to use along with their Technical strategies.
Should you use news when trading?
That’s the million-dollar question, should you use it or not. It would be impossible for me to give you a direct answer because it totally depends on the type of trader you are. If you are a scalper definitely you will need to know the news forecast before you enter a trade. Scalpers normally trade on the smaller timeframes, I see traders now even on the one (1) minute chart :-o.
When you are on smaller timeframes news releases could wipe out your position in the wink of an eye. While if you are trading on larger timeframes the impact of the news seems minimal compared to the smaller timeframes. Scalpers target fewer pips than swing traders and a single tweet from Mr. Trump could see candles on the smaller timeframe explode.
Think of it this way, scalpers are basically fishermen with tiny boats trying to catch fish. The news would be a thunderstorm with strong waves. If you have a tiny boat you would want to know when a storm is coming, so you don’t go to sea before or during. In another instance, you have the warship (swing traders lol) that can navigate the deadliest seas without fear. So it all depends on what type of boat (strategy) you have.
How scary are news releases?
Everybody knows that NFP is the first Friday in every month and the norm is for traders to be running scared. Closing their trades before Friday or securing profits by moving Stop-losses to breakeven in anticipation of the news. Not only for NFP but for any other Fundamental releases from broadcasts, tweets, Brexit,…
It doesn’t make sense for me to be following all these mumbo jumbo just to place a trade that will probably lose anyway. No strategy is 100% and not even news predictions are accurate, so why would I choose to be refreshing economic calendars every day and I can make money by ignoring it?
Let me share something very important. The simpler your strategy is, the less emotional struggle you will have. If you are trading one timeframe your mind won’t be telling you that other timeframes are causing you to lose. If you are not trading news your brain won’t find an excuse to say it was Mr. Trump who caused your trades to go bad. The fewer moving parts your strategy has the better it is for you to manage and improve upon.
News to many is a terrifying thing, but is it? If you are scared of the news, it means you think the news is smart, and it’s out to get you. You are saying if you are bullish you expect the news to be bearish and vice versa. At the end of the day, the news is just the news, meaning it could affect the market either way. So why do we automatically assume it will go against us? If you have a solid strategy while everyone is panicking you wouldn’t even bat an eye at any news event while your trades run.
There are many times you will close a trade because of fear of the news, then to your surprise, the news pushes the market in your direction. If you risked 1% on a single trade and the news is about to be released, 1% risk is already accounted for in your risk management. So why would you be scared to lose 1%?
Some will say they are afraid of slippage (market gaps over stop-loss) hence the reason they leave the market before the news. My answer to that remains the same if you are swing trading on higher timeframes with a good strategy slippage almost never affects trading and when it does the damage is minimal.
How do I trade with the news?
I don’t care about the news. I don’t look at the news, I don’t follow tweets. My strategy is 100% technical. You will by now get that I’m a simple trader, I don’t have the time to be following news. As you may have read in my previous posts My Forex Trading Daily Routine you didn’t see any mention of checking news because I don’t.
I trade mostly on the H1 and H4 timeframes (top-down analysis from Monthly to H1) even if there’s news, I don’t care what it was that caused a spike my strategy has already taken care of these anomalies automatically just by using higher timeframes. Usually, whenever the news pushes price my stop-loss is wide enough to absorb the shock and even if it isn’t, it would be just another 1% trade. The majority of the time news pushes the trades in my favor so I don’t care about the news. If the news pushes the market in my favor it’s just another trade it’s not different from a losing trade mentally. If it pushes the market against me and if I’m stopped out which rarely happens then it’s just another 1% trade. So there is no reason for me to follow the news. Instead, I choose to sleep like a baby through news releases.
Find what works for you that is all that counts! Tell me in the comments how do you trade with News Releases. Also, remember to like and share the post in all your forex groups. Show me that you are reading and you want me to continue posting everything about my trading style.
8 comments
thank you for all what you doing ❤❤
YOU WELCOME
Sou Brasileiro e acompanho o seu trabalha a muito tempo, a sua experiência está me ajudando bastante. obrigado.
This is great.. i really want more info on your trading style
How can I get your live trades and signals. Thanks for sharing the insight
kofihevi@gmail.com
You can’t. There are no signal/live trades my platform is strictly for those who are interested in learning.
amazing content brother
I’ve increasingly become less inclined to factoring news in my trading. I can’t even remember the last time I followed news reports.
However, when I started trading, I was a fundamentals kinda guy. I new everything from the NFPs to all the economic metrics you possibly think of. I could hardly separate trading from fundamentals. The longer I stayed on this path, the more my approach to the financial markets became emotionally based.
That meant being unable to engage with a clear, defined strategy that made sense at all; which in turn translated into unimaginable losses. Mr Purple Squid’s strategy was and is the Hail Mary for me. His literature has forced me to remove all the clutter and the unnecessary intellectualization of forex to the simplest if not the cleanest approach to trading and my wins now tower above my losses by a huge margin.
I hope my short story inspires someone, especially if you are a trader who solely depends on fundamentals in order to trade. Try the unconventional approach! After all, it is unconventional means often a time that tend to yield the best results.
Big thanks to the big guy. MR PURPLE SQUID!
From a grateful trader