Situation News FX offers accurate forex trading signals for significant news events.

This accurate forex trade strategy takes advantage of three important news times that dramatically affect the forex market:

• Market anticipation (Pre-News Trading)
• Reaction (News Event Trading)
• Follow through (Post Event Trading)

Past results are not necessarily indicative of future results.

Forex Trading Signals Strategy Overview

• Normal Stops: 25 to 35 Pips
• Targets: 40 to 60 Pips
• Win rate: 70% (Approx.)
• Typical Trading Times: 4:30am (50%); 8:30 (25%); 10:00 (10%) 2:15am, 7:30pm; 9:30pm(15%)

Trading the News Effectively with Plenty of Liquidity

One type of trading we do is known as “trading the news.” News trading provides opportunity for both financial freedom and more time to do what you want.  Trades are executed daily at pre-determined times in relation to important global news events.  The tactics and strategies used to trade the news depend on the type of news event being considered. Different tactics are best applied to specific news events.

News trading can be divided into three distinct trading times:

• Pre-news trading
• Spike trading
• Post-news trading

Pre-Release News Trading Tactics

Follow the Sentiment

This strategy is generally used for events where the market might have a bias regarding the upcoming news event because of:

• Reading into another news event. For example, if the market is expecting a commodity price index (CPI) number from Australia, the market already knows what the commodity price index is, so now, using that information there will be an expectation as to what the values of the consumer price index might be.
• The market might want to price in a worse than expected retail sales number based upon an already released bad wholesale number.

Predicting the Release

This strategy is generally used for Gross Domestic Product (GDP) kinds of news events because we know that the GDP is the sum total of all the economic activity of a particular country.  The GDP is the last number to be released.  You can make a pretty good prediction of the GDP prior to its release based upon retail sales, employment numbers, housing statistics, etc.  Therefore, if all of these stats are strong, the GDP will be strong also.

Trading the breakout of the previous session

With this strategy, let’s assume that you haven’t analyzed the data yourself and you don’t know what to expect. It might be prudent to trade in the same direction of the breakout from the previous session.  For example, data from UK is expected at 4:30 am. You’ve not been able to predict whether the data will be better than expected or worse than expected.  The Japan session starts at 5 pm and extends to 2 am. (2 am is when the European session begins.)  So, you decid to buy at the breakout of the high or sell at the breakout of the low expecting the momentum to continue.

Price trend reversal

This strategy is used described with the old adage “Buy on the rumor. Sell on the news.”

Spike Trading

News trading is also known as spike trading. In spike trading, the assumption is that the current price reflects all the current data as understood and digested by the market. In other words, whatever the price is, the good or bad news has already been taken into account.

When new data comes out that is not in line with the market’s expectations, the market gets out of balance. Price makes a sudden, swift movement towards a perceived new equilibrium price.

Spike traders try to get into the market before anybody else can. When they do, they profit from highly probable price spikes. For example, assume the market is expecting 20,000 new jobs to be added in Australia. When the actual numbers come out, if there are 19,000 – 21,000 new jobs added, there won’t be much of a change in the perceived equity of the Australia dollar since the expected numbers aren’t too far off from the actual numbers.

However, if the market is suprised with the actual number in relation to its estimated number, then market price can move dramatically in search of new equilibrium. For example, if 50,000 new Australian jobs are added when the market was only expecting 20,000, chances are that the value of the AUD/USD,  AUD/JPY, or AUD/NZD will climb higher. The way to trade the spike would be to try to buy the AUD/USD, AUD/JPY, and AUD/NZD before anyone else can.

Spike trading used to be a wonderful way to trade. It lasted for a few years before it got more and more difficult to get filled at a decent price without much slippage. Nowadays the brokers and market makers play games so you are not able to profit as well as you used to.

To be successful at spike trading, historical research has to be done for each news event to determine how large of a discrepancy will trigger a notable market move.  You will need to establish what your exact entry points will be in order for you to act on the trade one way or another.  You may opt to subscribe to a news trade call service which does this research for you.

Things to be aware of while trying to spike trade:

• It is now virtually impossible to manually trade news item spikes. Processing the numbers, deciding whether your triggers have been reached, and pressing buy or sell button just takes too much time.  The market move happens almost instantaneously. You need special tools to process the information and send your orders for you.
• Brokers have the tendency of widening the bid/ask spreads to sometimes insane levels.  I have seen spreads as wide a 100 pips on some news releases.  You could be filled, but at a horrible price.
• Slippage: When you click on buy or sell, there is no guarantee that your broker will fill you at that price.
• Low liquidity: Even if you are filled at a good price, the amount available is normally much less.

So do you still want to spike trade?

Post-Release News Trading

Post-News Trading can be classified into two categories:

1. Price Continuation
2. Price  Reversal

Price Continuation

There are always certain news events which tend to cause a major reaction. If a particular type of price breakout takes place, the price normally continues to go in the same direction. There are certain strategies we use to determine if trade events in the past have shown the tendency to continue with the initial news trend or direction. The strategies are discussed  in depth when you subscribe.

Moving Average Continuation

Other news events demonstrate the tendency to spike at the news announcement, until the price hits a moving average. Here I like to use a simple moving average (SMA). The price often continues to move in the new direction hereafter.

Opening of U.S. Stock Market

When the stock market opens up one may get another push in the direction of the trade. Durable goods and sales goods report from United States may cause positive movement in the initial trade in the direction of the Euro – the market will start buying commodity currency and selling Japanese Yen but within few minutes this movement will fizzle out. However, if the same trade is placed using co-related currency instead of the earlier trade, we might end up making good profit.

Trading Reversals With A Fixed Distance

It’s commonly seen that some news events create a spike in one direction by a predictable amount in terms of pips. The way to trade this is to place orders at a fixed distance above or below the price before the news announcement occurs. The strategey is that the market will spike up or down, fill our limit order and then reverse.

News trading is a great way to gain profits once you understand how to do it and of course there are always risk with any trading system and past performance does not guarantee future results.

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