Trading the News
I prefer trading with the trend. I love pulling the trigger when market and price are aligned. This makes minimal acceptable performance (MAP) much more likely. However, I often get lucky and price runs for quite some time after I’ve moved my stop to protect MAP. I seem to be unlucky more often when I’m trading against the trend.
However, even though currencies trend a lot, there are plenty of trading days when price stalls and we trade in a range for a few hours up to a few days. This means if we are going to trade, we need to adjust our expectations, become more conservative, and use the proper tools.
While range trading, I’m assuming that no luck will come my way, so I doubt we’ll break out of the range. I’ll use oscillators to buy at the bottom and sell at the top. I’ll get in a little late and out a little late, but MAP is likely in between.
If your range is less than 30 pips, not only is your risk/reward ratio going to be poor, you are going to need to be a perfect trader to catch reasonable profit. Because I seek a 1:3 risk/reward ratio, I usually do not trade tight ranges. Although many traders have told me they do well in such cases, I have not. Trading the news has an entirely different set of risks associated with it. You must be very careful.
Let’s first define what a “news trade” is and is not. In FX Bootcamp terms, it’s a trade that attempts to capture volatility created by a news release. This volatility creates a “breakout trade” ...