CONSERVATIVE NEWS TRADES
First, let’s review the three standing orders.
• Capital preservation: Survive at all costs.
• Capital acquisition: Lock in MAP.
• Capital appreciation: Go for maximum pips.
I review these now for you to align your satellites with the overall objective: Do all that you can to not lose money. The priority is not to make as much money as possible. It is to reduce your risk by patiently waiting for conservative, repeatable setups. News trading puts a trader’s patience to the test. The object of the FX Bootcamp news trade is to use the undue volatility to identify the important levels of support and resistance.
After the results of economic announcements hit the news wires, the market often jumps. When it does, it blows through the nearest and weakest levels of support and resistance. However, at some point, price has jumped too far too fast and pulls back. This price level is very important
It often takes three to five minutes to reach this level. When price begins to pull back, I mark the end of the news spike with a horizontal line on the charts. Now it is easy to see, and we can create a trade plan.
Before we do so, let’s review what happened.
Just before the news came out, the market began to wake up. Some traders are placing orders on hunches, rumors, or guesses. Remember, they can’t know the results of the news before it is released.
However, sometimes this last-second volatility is created by traders exiting a trade before the news comes ...